Item 1. Financial Statements

AXON ENTERPRISE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

​	​	​	​	​	​	​
​		March 31,		​	December 31,
​	​	2024		​	2023
​	​	(Unaudited)		​	​	​
ASSETS		​			​
Current assets:		​			​
Cash and cash equivalents	​	$	403,870	​	$	598,545
Marketable securities	​	​	99,720	​	​	77,940
Short-term investments	​		560,186	​		644,054
Accounts and notes receivable, net of allowance of $2,298 and $2,392 as of March 31, 2024 and December 31, 2023, respectively	​		476,764	​		417,690
Contract assets, net	​		266,172	​		275,779
Inventory	​		271,318	​		269,855
Prepaid expenses and other current assets	​		123,677	​		112,786
Total current assets	​		2,201,707	​		2,396,649
Property and equipment, net	​		209,166	​		200,533
Deferred tax assets, net	​		208,861	​		229,513
Intangible assets, net	​		89,419	​		19,539
Goodwill	​		308,470	​		57,945
Long-term notes receivable, net	​		2,397	​		2,588
Long-term contract assets, net	​	​	88,209	​	​	77,710
Strategic investments	​	​	295,497	​	​	231,730
Other long-term assets	​		212,470	​		220,638
Total assets	​	$	3,616,196	​	$	3,436,845
LIABILITIES AND STOCKHOLDERS’ EQUITY	​			​
Current liabilities:	​			​
Accounts payable	​	$	82,075	​	$	88,326
Accrued liabilities	​		127,415	​		188,230
Current portion of deferred revenue	​		516,404	​		491,691
Customer deposits	​		21,979	​		21,935
Other current liabilities	​		9,601	​		9,787
Total current liabilities	​		757,474	​		799,969
Deferred revenue, net of current portion	​		293,878	​		281,852
Liability for unrecognized tax benefits	​		18,610	​		18,049
Long-term deferred compensation	​		14,700	​		11,342
Long-term lease liabilities	​		32,546	​		33,550
Convertible notes, net	​	​	677,895	​	​	677,113
Other long-term liabilities	​		3,078	​		2,936
Total liabilities	​		1,798,181	​		1,824,811
Commitments and contingencies (Note 13)	​			​
Stockholders’ equity:	​			​
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively	​		—	​		—
Common stock, $0.00001 par value; 200,000,000 shares authorized; 75,466,171 and 75,301,424 shares issued and outstanding as of March 31, 2024, and December 31, 2023, respectively	​		1	​		1
Additional paid-in capital	​		1,421,080	​		1,347,410
Treasury stock at cost, 20,220,227 shares as of March 31, 2024 and December 31, 2023	​		(155,947)	​		(155,947)
Retained earnings	​		564,467	​		431,249
Accumulated other comprehensive loss	​		(11,586)	​		(10,679)
Total stockholders’ equity	​		1,818,015	​		1,612,034
Total liabilities and stockholders’ equity	​	$	3,616,196	​	$	3,436,845

​

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

AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in thousands, except per share data)

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024			2023
Net sales from products	​	$	272,048	​	$	219,389
Net sales from services	​		188,688	​		123,654
Net sales	​		460,736	​		343,043
Cost of product sales	​		151,698	​		107,584
Cost of service sales	​		48,992	​		31,357
Cost of sales	​		200,690	​		138,941
Gross margin	​		260,046	​		204,102
Operating expenses:	​			​
Sales, general and administrative	​		152,669	​		116,567
Research and development	​		91,097	​		70,927
Total operating expenses	​		243,766	​		187,494
Income from operations	​		16,280	​		16,608
Interest income, net	​	​	10,374	​	​	9,666
Other income, net	​		139,066	​		15,610
Income before provision for income taxes	​		165,720	​		41,884
Provision for (benefit from) income taxes	​		32,502	​		(3,255)
Net income	​	$	133,218	​	$	45,139
Net income per common and common equivalent shares:	​			​
Basic	​	$	1.77	​	$	0.62
Diluted	​	$	1.73	​	$	0.61
Weighted average number of common and common equivalent shares outstanding:	​			​
Basic	​		75,355	​		72,638
Diluted	​		77,132	​		73,880
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	​	​	​	​	​	​
Net income	​	$	133,218	​	$	45,139
Foreign currency translation adjustments	​		(801)	​		1,676
Unrealized gain (loss) on available-for-sale investments	​	​	(106)	​	​	184
Comprehensive income	​	$	132,311	​	$	46,999

​

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

​

AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​		​		​	​		​	​		​		​	​		​	​		Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	​	​	​	Other		​	Total
​	​	Common Stock				​	Paid-in		​	Treasury Stock				​	Retained		​	Comprehensive		​	Stockholders’
​	​	Shares	​	Amount		​	Capital		​	Shares	​	Amount		​	Earnings		​	Loss		​	Equity
Balance, December 31, 2023		75,301,424	​	$	1	​	$	1,347,410		20,220,227	​	$	(155,947)	​	$	431,249	​	$	(10,679)	​	$	1,612,034
Issuance of common stock under employee plans, net		164,747	​	​	—	​	​	(2,710)	​	—	​	​	—	​	​	—	​	​	—	​	​	(2,710)
Stock-based compensation		—	​	​	—	​	​	75,115	​	—	​	​	—	​	​	—	​	​	—	​	​	75,115
Issuance of replacement awards in connection with acquisitions	​	—	​	​	—	​	​	1,265	​	—	​	​	—	​	​	—	​	​	—	​	​	1,265
Net income		—	​	​	—	​	​	—	​	—	​	​	—	​	​	133,218	​	​	—	​	​	133,218
Other comprehensive loss, net		—	​	​	—	​	​	—	​	—	​	​	—	​	​	—	​	​	(907)	​	​	(907)
Balance, March 31, 2024		75,466,171	​	​	1	​	​	1,421,080	​	20,220,227	​	​	(155,947)	​	​	564,467	​	​	(11,586)	​	$	1,818,015

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​				​	​		​	​				​	​		​	​		Accumulated			​	​
​	​	​	​	​	​	​	Additional		​	​	​	​	​	​	​	​	​	Other		​	Total
​	​	Common Stock				​	Paid-in		​	Treasury Stock				​	Retained		​	Comprehensive		​	Stockholders’
​	​	Shares	​	Amount		​	Capital		​	Shares	​	Amount		​	Earnings		​	Loss		​	Equity
Balance, December 31, 2022		71,474,581	​	$	1	​	$	1,174,594		20,220,227	​	$	(155,947)	​	$	257,022	​	$	(7,179)	​	$	1,268,491
Issuance of common stock	​	154,500	​	​	—	​	​	33,650	​	—	​	​	—	​	​	—	​	​	—	​	​	33,650
Issuance of common stock under employee plans, net		335,629	​	​	—	​	​	(34,841)	​	—	​	​	—	​	​	—	​	​	—	​		(34,841)
Stock options exercised		1,901,535	​	​	—	​	​	54,346	​	—	​	​	—	​	​	—	​	​	—	​		54,346
Stock-based compensation	​	—	​	​	—	​	​	34,350	​	—	​	​	—	​	​	—	​	​	​	​	​	34,350
Issuance of common stock for business combination contingent consideration		7,817	​	​	—	​	​	—	​	—	​	​	—	​	​	—	​	​	—	​		—
Net income	​	—	​	​	—	​	​	—	​	—	​	​	—	​	​	45,139	​	​	—	​	​	45,139
Other comprehensive income, net		—	​	​	—	​	​	—	​	—	​	​	—	​	​	—	​	​	1,860	​	​	1,860
Balance, March 31, 2023		73,874,062	​	$	1	​	$	1,262,099		20,220,227	​	$	(155,947)	​	$	302,161	​	$	(5,319)	​	$	1,402,995

​

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

​

AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024			2023
Cash flows from operating activities:		​			​
Net income	​	$	133,218	​	$	45,139
Adjustments to reconcile net income to net cash provided by (used in) operating activities:	​			​
Gain on strategic investments and marketable securities, net	​		(97,419)	​		(15,570)
Stock-based compensation	​	​	75,115	​	​	34,350
Gain on remeasurement of previously held minority interest, net	​	​	(42,292)	​	​	—
Deferred income taxes	​	​	20,670	​		(9,660)
Depreciation and amortization	​	​	11,564	​		6,689
Bond amortization	​		(4,990)	​		(3,890)
Noncash lease expense	​		1,795	​		1,395
Amortization of debt issuance cost	​		782	​		756
Unrecognized tax benefits	​	​	544	​	​	855
Other noncash items	​	​	461	​	​	1,047
Change in assets and liabilities:	​		​	​		​
Accounts and notes receivable and contract assets	​		(51,132)	​		(50,431)
Inventory	​		(710)	​		(15,811)
Prepaid expenses and other assets	​		2	​		(64,348)
Accounts payable, accrued and other liabilities	​		(84,289)	​	​	(37,043)
Deferred revenue	​		20,743	​	​	50,199
Net cash used in operating activities	​		(15,938)	​		(56,323)
Cash flows from investing activities:	​			​	​	​
Purchases of investments	​		(241,457)	​	​	(145,124)
Proceeds from call, maturity, and sale of investments	​		330,472	​		81,088
Purchases of property and equipment	​		(16,194)	​	​	(8,513)
Proceeds from disposal of property and equipment	​	​	34	​	​	—
Purchases of intangible assets	​		—	​		(125)
Strategic investments	​		(9,128)	​	​	—
Business acquisition, net of cash acquired	​	​	(237,771)	​		—
Net cash used in investing activities	​		(174,044)	​		(72,674)
Cash flows from financing activities:	​			​	​	​
Net proceeds from equity offering	​	​	—	​	​	33,650
Proceeds from options exercised	​		—	​		39,181
Income and payroll tax payments for net-settled stock awards	​		(2,710)	​		(34,841)
Net cash provided by (used in) financing activities	​		(2,710)	​		37,990
Effect of exchange rate changes on cash and cash equivalents	​		(1,978)	​		779
Net decrease in cash and cash equivalents	​		(194,670)	​		(90,228)
Cash and cash equivalents and restricted cash, beginning of period	​		600,670	​		355,552
Cash and cash equivalents and restricted cash, end of period	​	$	406,000	​	$	265,324
​	​	​	​	​	​	​
Supplemental disclosures:	​			​
Cash and cash equivalents	​	$	403,870	​	$	263,414
Restricted cash (Note 1)	​		2,130	​		1,910
Total cash, cash equivalents and restricted cash shown in the statements of cash flows	​	$	406,000	​	$	265,324
​	​	​	​	​	​	​
Cash paid for income taxes, net of refunds	​	$	1,413	​	$	20,936
​	​	​	​	​	​	​
Non-cash transactions	​			​
Property and equipment purchases in accounts payable and accrued liabilities	​	$	1,406	​	$	1,130
Receivables from options exercised	​	$	—	​	$	15,165

​

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

​

Note 1 - Organization and Summary of Significant Accounting Policies

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

Our headquarters in Scottsdale, Arizona 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 management team, and sales, marketing, certain engineering, manufacturing, finance and other administrative support functions. We also have subsidiaries and / or offices located in Australia, Belgium, Canada, Finland, France, Germany, Hong Kong, India, Italy, the Netherlands, Spain, the United Kingdom and Vietnam.

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

Basis of Presentation and Use of Estimates

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are consistent with those followed in our annual consolidated financial statements for the year ended December 31, 2023, as filed on Form 10-K. In the opinion of management, these unaudited condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with our Form 10-K for the year ended December 31, 2023. Our results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the full year (or any other period). Significant estimates and assumptions in these unaudited condensed consolidated financial statements include:

	●	product warranty reserves,

	●	inventory valuation,

	●	revenue recognition,

	●	reserve for expected credit losses,

	●	valuation of goodwill, intangible and long-lived assets,

	●	valuation of strategic investments,

	●	recognition, measurement and valuation of current and deferred income taxes,

	●	stock-based compensation,

	●	business combinations, and

	●	recognition and measurement of contingencies and accrued litigation expense.

​

The Company believes that estimates used in the preparation of these unaudited condensed consolidated financial statements are reasonable; however, actual results could differ materially from those estimates.

Segment Information

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

Reportable segments are determined based on discrete financial information reviewed by our Chief Executive Officer, who is our chief operating decision maker (“CODM”). We organize and review operations based on products and services, and currently there are no operating segments that are aggregated. We perform an analysis of our reportable segments at least annually. Additional information related to our business segments is summarized in Note 15.

Geographic Information and Major Customers / Suppliers

For the three months ended March 31, 2024 and March 31, 2023, no individual country outside the United States represented more than 10% of total net sales. Individual sales transactions in the international market are generally larger and occur more intermittently than in the domestic market due to the profile of our customers. For the three months ended March 31, 2024 and March 31, 2023, no customer represented more than 10% of total net sales. At March 31, 2024 and December 31, 2023, no customer represented more than 10% of the aggregate balance of accounts and notes receivable and contract assets.

We currently purchase both off-the-shelf and custom components, including finished circuit boards, injection-molded plastic components, small machined parts, custom cartridge components, electronic components and off-the-shelf sub-assemblies from suppliers located in the United States, China, Mexico, Republic of Korea, Taiwan and Vietnam. We may source from other countries as well. Although we currently obtain many of these components from single source suppliers, we own substantially all of the injection molded component tooling, designs and test fixtures used in their production for all custom components. As a result, we believe we could obtain alternative suppliers in most cases. Although we have experienced supply chain disruptions relating to materials and port constraints, we have remained focused on closely managing our supply chain. We continue to bolster our strategic relationships in our supply chain, identifying secondary/alternate sourcing, adjusting build plans accordingly, and building in logistic modes in support of our increasing demand while working to minimize disruption to customers. We acquire most of our components on a purchase order basis and do not currently have significant long-term purchase contracts with most component suppliers.

Income per Common Share

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding stock options and unvested restricted stock units (“RSUs”). The effects of outstanding stock options, unvested RSUs, our 0.50% convertible senior notes due 2027 (the “Notes” or “2027 Notes”), and warrants to acquire shares of our common stock (the “Warrants” or “2027 Warrants”) are excluded from the computation of diluted net income per share in periods in which the effect would be antidilutive. The calculation of the weighted average number of shares outstanding and earnings per share are as follows (in thousands except per share data):

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024			2023
Numerator for basic and diluted earnings per share:		​			​
Net income	​	$	133,218	​	$	45,139
Denominator:	​			​
Weighted average shares outstanding	​		75,355	​		72,638
Dilutive effect of stock-based awards	​		1,243	​		1,242
Dilutive effect of 2027 Notes	​	​	534	​	​	—
Diluted weighted average shares outstanding	​		77,132	​		73,880
​	​	​	​	​	​	​
Net income per common share:	​		​	​		​
Basic	​	$	1.77	​	$	0.62
Diluted	​	$	1.73	​	$	0.61

​

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

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024			2023
Stock-based awards	​		308	​		1,469
2027 Notes	​		2,483	​		3,017
2027 Warrants	​		3,017	​		3,017
Total potentially dilutive securities	​	​	5,808	​		7,503

​

For additional information regarding our 2027 Notes, refer to Note 9.

​

Warranty Reserves

We warranty our CEDs, Axon cameras and certain related accessories from manufacturing defects on a limited basis for a period of one year after purchase and, thereafter, will replace any defective unit for a fee. 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.

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

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024		​	2023
Balance, beginning of period	​	$	7,374	​	$	811
Utilization of reserve	​		(2,207)	​		(438)
Warranty expense	​		1,119	​		2,928
Balance, end of period	​	$	6,286	​	$	3,301

​

Fair Value Measurements and Financial Instruments

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

	●	Level 1 – Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets for assets or liabilities that are identical to the assets or liabilities being measured.

	●	Level 2 – Valuation techniques in which significant inputs include quoted prices from active markets for assets or liabilities that are similar to the assets or liabilities being measured and/or quoted prices for assets or liabilities that are identical or similar to the assets or liabilities being measured from markets that are not active. Also, model-derived valuations in which all significant inputs and significant value drivers are observable in active markets are Level 2 valuation techniques.

	●	Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about inputs that market participants would use in pricing an asset or liability.

We have cash equivalents and investments, which at March 31, 2024 comprised money market funds, corporate bonds, term deposits, U.S. government bonds, agency bonds and U.S. Treasury bills. Cash equivalents and investments at December 31, 2023 also included commercial paper and U.S. Treasury inflation-protected securities. See additional disclosure regarding the fair value of our cash equivalents and investments in Note 3. Debt investments are classified as available-for-sale and realized gains and losses are recorded using the specific identification method. Included in the balance of other long-term assets as of March 31, 2024 and December 31, 2023 was $8.1 million and $7.6 million, respectively, related to corporate-owned life insurance policies, which are used to fund our deferred compensation plan. We determine the fair value of insurance contracts by obtaining the cash surrender value of the contracts from the issuer, a Level 2 valuation technique.

​

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

​

We have strategic investments in various unconsolidated affiliates as of March 31, 2024. The estimated fair value of the investments was determined based on Level 3 inputs. In determining the estimated fair value of our strategic investments in privately held companies, we utilize observable data available to us as discussed further in Note 7.

​

The fair value of our 2027 Notes is determined based on the closing trading price per $1,000 of the Notes as of the last day of trading for the period. We consider the fair value of the Notes at March 31, 2024 to be a Level 2 measurement as they are not publicly traded. The fair value of the Notes is primarily affected by the trading price of our common stock and market interest rates.

​

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

Restricted Cash

Restricted cash balances of $2.1 million as of March 31, 2024 and December 31, 2023, respectively, primarily relate to funds held in an international bank account for a country in which we are required to maintain a minimum balance to operate. As of March 31, 2024, approximately $2.0 million was included in prepaid expenses and other assets on our consolidated balance sheet, with the remainder in other long-term assets.

Valuation of Goodwill, Intangibles and Long-lived Assets

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

Finite-lived intangible assets and other long-lived assets are amortized over their estimated useful lives. We do not amortize goodwill and intangible assets with indefinite useful lives; rather such assets are required to be tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. We test goodwill and intangible assets for impairment on an annual basis in the fourth quarter and on an interim basis when certain events and circumstances exist.

Business Combinations

Acquired businesses are included in the consolidated financial statements from the date we gain control of the business. We recognize, separately from goodwill, the identifiable assets acquired and liabilities assumed at their estimated acquisition-date fair values. Our estimates are inherently uncertain and subject to refinement. During the measurement period, which may be up to one year from the acquisition date, we may record qualifying adjustments to the fair value of these tangible and intangible assets acquired and liabilities assumed, with the corresponding offset to goodwill. In addition, uncertain tax positions, tax-related valuation allowances and pre-acquisition contingencies are initially recorded in connection with a business combination as of the acquisition date. We continue to collect information and reevaluate these estimates and assumptions quarterly and record any qualifying adjustments to our preliminary estimates to goodwill provided that we are within the measurement period. Upon the conclusion of the measurement period or final determination of the fair value of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to our consolidated statement of operations.

​

In the event that we acquire an entity in which we previously held an existing ownership interest, the difference between the fair value of the interest as of the acquisition date and the carrying value of the interest is recorded as a gain or loss within other income, net, in the consolidated statement of operations. Preexisting relationships subject to termination as a result of consummating an acquisition may require the recognition of a gain or loss upon settlement, which is recognized within income (loss) from operations on the consolidated statement of operations. All third-party transaction-related costs are recognized as expense in the period in which they are incurred.

​

Recently Issued Accounting Guidance and Disclosure Rules

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

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

Reclassification of Prior Year Presentation

Certain prior year amounts have been reclassified for consistency with the current year presentation. These reclassifications are not material and had no effect on the reported results of operations.

Note 2 - Revenues

Nature of Products and Services

The following tables present our revenues by primary product and service offering (in thousands):

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Three Months Ended March 31, 2024								​	Three Months Ended March 31, 2023
​		​	​		Software and			​	​		​	​		Software and			​	​
​	​	TASER		​	Sensors		​	Total		​	TASER		​	Sensors		​	Total
TASER Devices (Professional)	​	$	98,676	​	​	—	​	$	98,676	​	$	67,472	​	$	—	​	$	67,472
Cartridges	​		56,198	​	​	—	​	​	56,198	​		46,800	​	​	—	​	​	46,800
Axon Evidence and Cloud Services	​		12,221	​	​	175,458	​	​	187,679	​		7,201	​	​	118,314	​	​	125,515
Extended Warranties	​		8,526	​	​	18,474	​	​	27,000	​		7,670	​	​	14,085	​	​	21,755
Axon Body Cameras and Accessories	​		—	​	​	51,205	​	​	51,205	​		—	​	​	38,797	​	​	38,797
Axon Fleet Systems	​		—	​	​	28,387	​	​	28,387	​		—	​	​	32,972	​	​	32,972
Other (1) (2)	​		3,127	​	​	8,464	​	​	11,591	​		5,139	​	​	4,593	​	​	9,732
Total	​	$	178,748	​	$	281,988	​	$	460,736	​	$	134,282	​	$	208,761	​	$	343,043

​

​

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

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

​

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

​

​	​	​	​	​	​	​		​		​		​	​	​	​		​
​	​	Three Months Ended March 31,													​		​
​	​	2024				​		​		2023					​		​
United States		$	392,406		85	%		​		$		290,938		85	%		​
Other countries	​		68,330		15	​		​				52,105		15	​		​
Total	​	$	460,736		100	%		​		$		343,043		100	%		​

​

Contract Balances

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

​

​	​	​	​
​		March 31, 2024
Contract assets, net	​	$	354,381
Contract liabilities (deferred revenue)	​		810,282
Revenue recognized in the period from:	​
Amounts included in contract liabilities at the beginning of the period	​		186,485

​

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

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2024								​	December 31, 2023
​		Current			Long-Term			Total			Current			Long-Term			Total
Extended Warranty:		​	​		​			​			​			​			​
TASER	​	$	14,877	​	$	18,802	​	$	33,679	​	$	14,773	​	$	18,828	​	$	33,601
Software and Sensors	​		34,396	​		15,980	​		50,376	​		33,940	​		16,036	​		49,976
​	​		49,273	​		34,782	​		84,055	​		48,713	​		34,864	​		83,577
Hardware:	​			​			​			​			​			​
TASER	​		54,368	​		33,613	​		87,981	​		42,464	​		29,689	​		72,153
Software and Sensors	​		61,353	​		117,808	​		179,161	​		62,635	​		117,024	​		179,659
​	​		115,721	​		151,421	​		267,142	​		105,099	​		146,713	​		251,812
Services:	​			​			​			​			​			​
TASER	​		11,808	​		2,183	​		13,991	​		7,939	​		3,983	​		11,922
Software and Sensors	​		339,602	​		105,492	​		445,094	​		329,940	​		96,292	​		426,232
​	​	​	351,410	​	​	107,675	​	​	459,085	​	​	337,879	​	​	100,275	​	​	438,154
Total	​	$	516,404	​	$	293,878	​	$	810,282	​	$	491,691	​	$	281,852	​	$	773,543

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	March 31, 2024								​	December 31, 2023
​		Current			Long-Term			Total			Current			Long-Term			Total
TASER	​	$	81,053	​	$	54,598	​	$	135,651	​	$	65,176	​	$	52,500	​	$	117,676
Software and Sensors	​		435,351	​		239,280	​		674,631	​		426,515	​	​	229,352	​	​	655,867
Total	​	$	516,404	​	$	293,878	​	$	810,282	​	$	491,691	​	$	281,852	​	$	773,543

​

Remaining Performance Obligations

As of March 31, 2024, we had approximately $7.0 billion of remaining performance obligations, which included both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The remaining performance obligations are limited only to arrangements that meet the definition of a contract under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, as of March 31, 2024. We currently expect to recognize between 15% - 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.

Note 3 - Cash, Cash Equivalents and Investments

The following tables summarize our cash, cash equivalents, marketable securities and available-for-sale investments at March 31, 2024 and December 31, 2023 (in thousands):

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	As of March 31, 2024
​		​	​		Gross			Gross			​	​			Cash and			​	​		​	​
​	​	Amortized		​	Unrealized		​	Unrealized		​	​	​		​	Cash		​	Marketable		​	Short-Term		​
​	​	Cost		​	Gains		​	Losses		​	Fair Value			​	Equivalents		​	Securities		​	Investments		​
Cash	​	$	110,509	​	​	—	​	​	—	​	$	110,509	​	​	$	110,509	​	$	—	​	$	—	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Level 1:	​		​	​	​	​	​	​	​	​			​	​			​			​			​
Money market funds	​		101,721	​	​	—	​	​	—	​		101,721	​	​		101,721	​		—	​		—	​
Agency bonds	​		87,635	​	​	—	​	​	(48)	​		87,587	​	​		81,640	​		—	​		5,947	​
Treasury bills	​	​	310,446	​	​	1	​	​	(441)	​	​	310,006	​	​	​	—	​	​	—	​	​	310,006	​
U.S. Government	​	​	130,793	​	​	—	​	​	(29)	​	​	130,764	​	​	​	—	​	​	—	​	​	130,764	​
Marketable securities	​	​	90,000	​	​	9,720	​	​	—	​	​	99,720	​	​		—	​		99,720	​		—	​
Subtotal	​		720,595	​	​	9,721	​		(518)	​		729,798	​	​	​	183,361	​	​	99,720	​	​	446,717	​
Level 2:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Term deposits	​	​	211,729	​	​	—	​	​	—	​	​	211,729	​	​	​	110,000	​	​	—	​	​	101,729	​
Corporate bonds	​	​	11,752	​	​	7	​	​	(19)	​	​	11,740	​	​	​	—	​	​	—	​	​	11,740	​
Subtotal	​	​	223,481	​	​	7	​	​	(19)	​	​	223,469	​	​	​	110,000	​	​	—	​	​	113,469	​
Total	​	$	1,054,585	​	$	9,728	​	$	(537)	​	$	1,063,776	​	​	$	403,870	​	$	99,720	​	$	560,186	​

​

As of March 31, 2024, we had $531.5 million of available-for-sale investments with unrealized losses. Of the $531.5 million of available-for-sale investments with unrealized losses, $25.2 million has been in a continuous unrealized loss position for 12 months or longer, with total gross unrealized losses of less than $0.1 million. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost bases.

​

During the year ended December 31, 2021, we acquired 9.0 million shares of common stock of Cellebrite DI Ltd (“CLBT”) with a fair value of $90.0 million. The CLBT common stock is recorded as marketable securities in the accompanying condensed consolidated balance sheets and its fair value is adjusted every reporting period. Changes in fair value are recorded in the condensed consolidated statement of operations as unrealized gain or (loss) on marketable securities, which is included in other income, net. During the three months ended March 31, 2024, we recorded an unrealized gain on marketable securities of $21.8 million, relating to CLBT.

​

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	As of December 31, 2023
​		​	​		Gross			Gross			​	​			Cash and			​	​		​	​
​	​	Amortized		​	Unrealized		​	Unrealized		​	​	​		​	Cash		​	Marketable		​	Short-Term		​
​	​	Cost		​	Gains		​	Losses		​	Fair Value			​	Equivalents		​	Securities		​	Investments		​
Cash	​	$	406,743	​	$	—	​	$	—	​	$	406,743	​	​	$	406,743	​	$	—	​	$	—	​
​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Level 1:	​			​	​	​	​			​			​	​			​			​			​
Money market funds	​		1,470	​	​	—	​		—	​		1,470	​	​		1,470	​		—	​		—	​
Agency bonds	​		222,057	​	​	2	​		(174)	​		221,885	​	​		101,635	​		—	​		120,250	​
U.S. Government	​	​	238,747	​	​	120	​	​	(237)	​	​	238,630	​	​	​	—	​	​	—	​	​	238,630	​
Treasury bills	​	​	148,063	​	​	28	​	​	—	​	​	148,091	​	​	​	88,697	​	​	—	​	​	59,394	​
Marketable securities	​	​	90,000	​	​	—	​	​	(12,060)	​	​	77,940	​	​		—	​		77,940	​		—	​
Subtotal	​		700,337	​	​	150	​		(12,471)	​		688,016	​	​	​	191,802	​	​	77,940	​	​	418,274	​
Level 2:	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
Term deposits	​	​	128,205	​	​	—	​	​	—	​	​	128,205	​	​	​	—	​	​	—	​	​	128,205	​
Corporate bonds	​	​	80,646	​	​	8	​	​	(165)	​	​	80,489	​	​	​	—	​	​	—	​	​	80,489	​
Treasury Inflation-Protected Securities	​	​	2,635	​	​	—	​	​	(5)	​	​	2,630	​	​	​	—	​	​	—	​	​	2,630	​
Commercial paper	​	​	14,456	​	​	—	​	​	—	​	​	14,456	​	​	​	—	​	​	—	​	​	14,456	​
Subtotal	​	​	225,942	​	​	8	​	​	(170)	​	​	225,780	​	​	​	—	​	​	—	​	​	225,780	​
Total	​	$	1,333,022	​	$	158	​	$	(12,641)	​	$	1,320,539	​	​	$	598,545	​	$	77,940	​	$	644,054	​

​

​

​

​

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

​

During the year ended December 31, 2023, we recorded a $38.7 million unrealized gain on marketable securities from our investment in CLBT.

​

​

​

Note 4 - Expected Credit Losses

We are exposed to credit losses primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable, contract assets, notes receivable and off-balance-sheet exposures is developed using historical collection experience, published or estimated credit default rates for entities that represent our customer base, current and future economic and market conditions, and a review of the current status of customers’ trade accounts receivables. Additionally, specific allowance amounts are established to record the appropriate provision for customers that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution, payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are written off when determined to be uncollectible. We review receivables for U.S. and international customers separately to better reflect different published credit default rates and economic and market conditions.

​

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

​

​	​	​	​	​	​	​	​	​	​
​		Three Months Ended March 31, 2024
​	​	United States		​	Other countries		​	Total
Balance, beginning of period	​	$	3,369	​	$	597	​	$	3,966
Provision for expected credit losses	​	​	195	​	​	22	​	​	217
Amounts written off charged against the allowance	​	​	(302)	​	​	(51)	​	​	(353)
Other, including foreign currency translation	​		—	​	​	14	​		14
Balance, end of period	​	$	3,262	​	$	582	​	$	3,844

​

​

​

​

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

​

​	​	​	​	​	​	​
​		March 31, 2024		​	December 31, 2023
Accounts receivable and notes receivable, current	​	$	2,298	​	$	2,392
Contract assets, net	​		1,516	​		1,516
Long-term notes receivable, net of current portion	​		30	​		44
Other current liabilities	​	​	—	​	​	14
Total allowance for expected credit losses on customer receivables	​	$	3,844	​	$	3,966

​

​

​

​

​

​

​

Note 5 - Inventory

Inventories are stated at the lower of cost or realizable values. Cost of inventories is determined on the first-in, first-out basis utilizing a standard cost methodology. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their net realizable value. These provisions are based on management’s best estimate after considering historical demand, projected future demand, inventory purchase commitments, industry and market trends and conditions among other factors. We evaluate inventory costs for abnormal costs due to excess production capacity and treat such costs as period costs.

​

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

​

​	​	​	​	​	​	​
​		March 31, 2024			December 31, 2023
Raw materials	​	$	107,121	​	$	104,112
Finished goods	​		164,197	​		165,743
Total inventory	​	$	271,318	​	$	269,855

​

​

​

​

​

​

Note 6 – Goodwill and Intangible Assets

The changes in the carrying amount of goodwill for the three months ended March 31, 2024 were as follows (in thousands):

​	​	​	​	​	​	​	​	​	​
​		​	​		Software and			​	​
​	​	TASER		​	Sensors		​	Total
Balance, beginning of period	​	$	2,984	​	$	54,961	​	$	57,945
Goodwill acquired	​	​	—	​	​	250,653	​	​	250,653
Purchase accounting adjustments	​	​	—	​	​	(231)	​	​	(231)
Foreign currency translation adjustments	​		(37)	​		140	​		103
Balance, end of period	​	$	2,947	​	$	305,523	​	$	308,470

​

​

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

​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	​	​	March 31, 2024								​	December 31, 2023
​		​		Gross			​	​		Net			Gross			​	​		Net
​	​	Useful	​	Carrying		​	Accumulated		​	Carrying		​	Carrying		​	Accumulated		​	Carrying
​	​	Life	​	Amount		​	Amortization		​	Amount		​	Amount		​	Amortization		​	Amount
Amortizable (definite-lived) intangible assets:							​			​			​			​			​
Domain names		3 ‑ 10 years	​	$	3,043	​	​	(2,205)	​	$	838	​	$	3,043	​	$	(2,128)	​	$	915
Issued patents		5 ‑ 25 years	​		3,147	​	​	(1,648)	​		1,499	​		3,222	​		(1,707)	​		1,515
Trademarks		3 ‑ 15 years	​		3,214	​	​	(935)	​		2,279	​		1,333	​		(817)	​		516
Customer relationships		4 ‑ 10 years	​		18,629	​	​	(2,719)	​		15,910	​		5,530	​		(3,620)	​		1,910
Non-compete agreements		3 ‑ 4 years	​		—	​	​	—	​		—	​		448	​		(448)	​		—
Developed technology		3 ‑ 8 years	​		82,532	​	​	(15,438)	​		67,094	​		29,402	​		(16,562)	​		12,840
Total amortizable			​		110,565	​		(22,945)	​		87,620	​		42,978	​		(25,282)	​		17,696
Non-amortizable (indefinite-lived) intangible assets:									​			​			​			​
Trademarks			​		1,068	​		—	​		1,068	​		1,068	​		—	​		1,068
Patents and trademarks pending			​		731	​		—	​		731	​		775	​		—	​		775
Total non-amortizable			​		1,799	​		—	​		1,799	​		1,843	​		—	​		1,843
Total intangible assets			​	$	112,364	​	$	(22,945)	​	$	89,419	​	$	44,821	​	$	(25,282)	​	$	19,539

​

​

​

​

​

​

Amortization expense of intangible assets for the three months ended March 31, 2024 was $3.0 million. Amortization expense of intangible assets for the three months ended March 31, 2023 was $1.0 million. Estimated amortization for intangible assets with definite lives for the remaining nine months of 2024, the next five years ended December 31, and thereafter, is as follows (in thousands):

​

​	​	​	​
2024 remaining		$	11,520
2025	​		12,534
2026	​		12,336
2027	​		11,394
2028	​		11,283
2029	​		11,098
Thereafter	​		17,455
Total	​	$	87,620

​

​

​

​

​

​

​

​

​

Note 7 - Strategic Investments

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

​

In conjunction with certain of our strategic investments, we have the ability to commit additional capital over time through warrants and call options; for some investments, the exercisability and exercise prices are conditional on the achievement of certain performance metrics.

​

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

​	​	​	​	​	​	​	​	​	​	​	​	​	​			​			​	​		​		​	​		​		​		​		​		​
​	​	Three Months Ended March 31, 2024												​		Three Months Ended March 31, 2023
​		Strategic investments			Warrants			​	Call options		Total					Strategic investments						Warrants					​		Call options		​		​		Total
Balance, beginning of period	​	$	212,996	​	$	1,501	​	$	17,233	​	$	231,730	​			$			277,676	​		$		1,654	​		$		17,233		​		$		296,563
Investments	​	​	9,128	​	​	—	​	​	—	​	​	9,128	​			​			—	​		​		—	​		​		—		​		​		—
Fair value adjustments:	​	​	​	​	​	​	​	​	​	​	​	​	​			​			​	​		​		​	​		​		​		​		​		​
Realized gains	​	​	45,162	​	​	—	​	​	—	​	​	45,162	​			​			—	​		​		—	​		​		—		​		​		—
Realized losses	​	​	—	​	​	—	​	​	(2,870)	​	​	(2,870)	​			​			—	​		​		—	​		​		—		​		​		—
Unrealized gains	​	​	74,784	​	​	855	​	​	—	​	​	75,639	​			​			—	​		​		—	​		​		—		​		​		—
Exercises	​	​	(61,962)	​	​	—	​	​	(1,330)	​	​	(63,292)	​			​			—	​		​		—	​		​		—		​		​		—
Balance, end of period	​	$	280,108	​	$	2,356	​	$	13,033	​	$	295,497	​			$			277,676	​		$		1,654	​		$		17,233		​		$		296,563

​

In January 2024, the Company acquired the remaining outstanding stock of a strategic investment. The Company’s existing interest had a fair value at acquisition date of $63.3 million which resulted in a non-taxable gain of $42.3 million. For additional information on the business combination, refer to Note 16.

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

​	​	​	​	​	​	​	​	​	​	​	​	​
​	​	Inception to date
​		Strategic investments			Warrants			​	Call options		Total
Investments	​	$	133,626	​	​	4,222	​	​	17,233	​	$	155,081
Fair value adjustments:	​	​	​	​	​	​	​	​	​	​	​	​
Realized gains	​	​	57,474	​	​	—	​	​	—	​	​	57,474
Realized losses	​	​	—	​	​	—	​	​	(2,870)	​	​	(2,870)
Unrealized gains	​	​	149,601	​	​	29,928	​	​	—	​	​	179,529
Unrealized losses and impairments	​	​	(82,304)	​	​	(1,705)	​	​	—	​	​	(84,009)
Exercises	​	​	36,257	​	​	(30,089)	​	​	(1,330)	​	​	4,838
Sales	​	​	(14,546)	​	​	—	​	​	—	​	​	(14,546)
Balance, end of period	​	$	280,108	​	$	2,356	​	$	13,033	​	$	295,497

​

​

Note 8 - Accrued Liabilities

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

​

​	​	​	​	​	​	​
​		March 31, 2024			December 31, 2023
Accrued salaries, commissions, benefits and bonus	​	$	35,997	​	$	125,636
Accrued income and other taxes	​		22,392	​		5,784
Accrued inventory in transit	​	​	20,944	​	​	12,197
Accrued professional, consulting and lobbying fees	​		10,415	​		7,377
Accrued warranty expense	​		6,286	​		7,374
Other accrued expenses	​		31,381	​		29,862
Accrued liabilities	​	$	127,415	​	$	188,230

​

​

Note 9 – Convertible Senior Notes

2027 Notes

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

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

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

​

​	​	​	​	​	​
​	March 31, 2024			December 31, 2023
Principal	$	690,000	​	$	690,000
Unamortized debt issuance costs	​	(12,105)	​	​	(12,887)
Convertible notes carrying amount, net	$	677,895	​	$	677,113

​

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

​

​	​	​	​	​	​
​	March 31, 2024			December 31, 2023
2027 Notes	$	1,006.0	​	$	873.3

​

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

​

​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	2024			2023
Contractual interest expense	$	863	​	$	863
Amortization of debt issuance costs	​	782	​	​	756
Total interest expense	$	1,645	​	$	1,619

​

Note Hedge

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

​

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

​

The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial conversion price of the respective Notes, subject to adjustment, and is exercisable upon conversion of the Notes. If exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. We have accounted for the aggregate amount of purchase price for the Note Hedge as a reduction to additional paid-in capital. The Note Hedge will expire upon the maturity of the Notes. The Note Hedge is intended to reduce the potential economic

dilution upon conversion of the Notes in the event that the market value per share of our common stock at the time of exercise is greater than the conversion price of the Notes. The Note Hedge is a separate transaction and is not part of the terms of the Notes. Holders of the Notes do not have any rights with respect to the Note Hedge. The Note Hedge does not impact earnings per share, as it was entered into to offset any dilution from the Notes. As of March 31, 2024, 3,016,680 shares remain subject to the Note Hedge.

​

Note Warrants

​

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

​

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

Note 10 - Income Taxes

We file income tax returns for federal purposes and in many states, as well as in multiple foreign jurisdictions. Our tax filings remain subject to examination by applicable tax authorities for a certain length of time, generally three to four years, but can be up to ten years in some jurisdictions following the tax year to which these filings relate.

Deferred Tax Assets

Net deferred income tax assets at March 31, 2024, primarily include R&D capitalization net of amortization, deferred revenue, convertible debt net of amortization, accruals and reserves, and stock-based compensation expense, partially offset by accelerated depreciation expense, amortization of intangibles, unrealized gains on certain investments, and valuation allowance reserve. Our total net deferred tax assets at March 31, 2024 were $208.9 million.

In preparing our condensed consolidated financial statements, management assesses the likelihood that its deferred tax assets will be realized from future taxable income. In evaluating our ability to recover our deferred income tax assets, management considers all available positive and negative evidence, including our operating results, ongoing tax planning and forecasts of future taxable income on a jurisdiction-by-jurisdiction basis. A valuation allowance is established if it is determined that it is more likely than not that some portion or all of the net deferred tax assets will not be realized. Management exercises significant judgment in determining our provisions for income taxes, our deferred tax assets and liabilities, and our future taxable income for purposes of assessing our ability to utilize any future tax benefit from our deferred tax assets.

As of March 31, 2024, management continues to believe the positive evidence from projected future earnings outweighs the negative evidence and a valuation allowance is only needed on specific deferred tax assets. We have concluded that a valuation allowance is necessary against unrealized investment losses as well as transaction costs incurred in connection with certain investments. Additionally, we do have Arizona R&D tax credits expiring unutilized each year; therefore, management has concluded that it is more likely than not that our Arizona R&D deferred tax asset will not be realized, and a valuation allowance has been recorded against this net asset.

In Australia, we have determined that sufficient deferred tax liabilities will reverse in order to realize all assets except one long-lived intangible where there is not an expectation that the asset may be realized. Therefore, we continue to recognize a partial valuation allowance for Australia.

We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax purposes. Management has made the determination that it is more likely than not that the full benefit of the R&D tax credit will not be sustained on examination and recorded a liability for unrecognized tax benefits of $26.1 million as of

March 31, 2024. Should the unrecognized benefit of $26.1 million be recognized, our effective tax rate would be favorably impacted. Approximately $6.5 million of the unrecognized tax benefit associated with R&D credits has been netted against the R&D deferred tax asset.

Effective Tax Rate

Our overall effective tax rate for the three months ended March 31, 2024, after discrete period adjustments, was 19.6%. Before discrete adjustments, the estimated annual effective tax rate was 21.9%, which differs from the federal statutory rate primarily due to the impact of R&D tax credits and net gain related to an investment transaction not recognized for tax, offset by the executive compensation limitation under Internal Revenue Code (“IRC”) Section 162(m) on projected pre-tax income for the year. The effective tax rate was favorably impacted by a $4.1 million discrete tax benefit primarily associated with net windfalls related to stock-based compensation for RSUs and performance stock units (“PSUs”) that vested during the three months ended March 31, 2024.

Note 11 - Stockholders’ Equity

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2024 (number of units and aggregate intrinsic value in thousands):

​

​	​	​	​	​	​	​	​	​
​		Number of		Weighted Average			Aggregate
​	​	Units	​	Grant-Date Fair Value		​	Intrinsic Value
Units outstanding, beginning of year		1,615	​	$	193.09		​
Granted		478	​	​	257.49		​
Released		(174)	​	​	213.88		​
Forfeited		(42)	​	​	186.93		​
Units outstanding, end of period		1,877	​	$	207.73	​	$	587,321

​

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $312.88 per share, multiplied by the number of RSUs outstanding. As of March 31, 2024, there was $321.8 million in unrecognized compensation costs related to RSUs under our stock plans for awards that are expected to vest. We expect to recognize the cost related to the RSUs over a weighted average period of 2.4 years. RSUs are settled when vesting requirements are met.

Certain RSUs that vested in the three months ended March 31, 2024 were net-share settled such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total shares withheld related to RSUs were approximately 8,800 and had an aggregate value of $2.7 million on their respective vesting dates as determined by the closing stock price on such dates. Payments for the employees’ tax obligations are reflected as a financing activity within the condensed consolidated statements of cash flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

On January 2, 2024, we granted an aggregate of 0.4 million RSUs to employees whose compensation was under a specified threshold. The RSUs generally vest in five annual installments from March 2024 through March 2028. For the three months ended March 31, 2024, there was $29.6 million of stock compensation expense related to these RSUs that was primarily recorded within cost of product and service sales.

Performance Stock Units

The following table summarizes PSU activity for the three months ended March 31, 2024 (number of units and aggregate intrinsic value in thousands):

​

​	​	​	​	​	​	​	​	​
​		Number of		Weighted Average			Aggregate
​	​	Units	​	Grant-Date Fair Value		​	Intrinsic Value
Units outstanding, beginning of year		394	​	$	201.61		​
Granted		15	​		284.00		​
Released		(1)	​		180.89		​
Forfeited		(7)	​		93.32		​
Units outstanding, end of period		401	​	$	206.75	​	$	125,533

​

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $312.88 per share, multiplied by the number of PSUs outstanding. As of March 31, 2024, there was $51.2 million in unrecognized compensation costs related to PSUs under our stock plans for awards that are expected to vest. We expect to recognize the cost related to the PSUs over a weighted average period of 2.7 years. PSUs are settled when vesting requirements are met.

2024 CEO Performance Award and 2024 eXponential Stock Plan

On October 14, 2023, our Board of Directors approved the 2024 eXponential Stock Plan (the “2024 Employee XSP”) and, on December 20, 2023, the Board approved a pool of 4,516,370 shares of our common stock to be reserved for grants of awards of eXponential Stock Units (“2024 XSUs”) to employees under the 2024 Employee XSP, including those who elected to have compensation withheld in order to participate in the 2024 Employee XSP. The 2024 XSUs are grants of performance-based RSUs, each with a term of approximately seven years, that vest in seven substantially equal tranches. Additionally, on December 18, 2023, the Compensation Committee granted to our Chief Executive Officer an award of 2024 XSUs covering 679,102 shares of our common stock (the “2024 CEO Performance Award”). Both the 2024 Employee XSP and the 2024 CEO Performance Award are subject to shareholder approval at our upcoming Annual Meeting of Shareholders. Dollar-denominated awards granted under the 2024 Employee XSP and the 2024 CEO Performance Award were converted to 2024 XSUs using a price per share of common stock of $220.88, which reflects the 90-day volume weighted average price per share as of the trading day preceding the grant date. Neither the 2024 Employee XSP nor the 2024 CEO Performance Award will have a financial statement impact unless and until either or both are approved by shareholders at our Annual Meeting of Shareholders in May 2024.

Stock Option Activity

Options outstanding and exercisable for the period ended March 31, 2024 was 0.5 million with a weighted average exercise price of $28.58 and a weighted average remaining contractual life of 3.9 years. The aggregate intrinsic value was $150.9 million and represents the difference between the exercise price of the underlying stock options and the closing stock price on the last trading day of the period ended March 31, 2024, which was $312.88. There was no stock option activity for the three months ended March 31, 2024.

Stock-based Compensation Expense

The following table summarizes the composition of stock-based compensation expense for the three months ended March 31, 2024 and 2023 (in thousands):

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​		2024			2023
Cost of product sales and service sales	​	$	29,595	​	$	1,320
Sales, general and administrative expenses	​		23,155	​		15,445
Research and development expenses	​		22,365	​		17,585
Total stock-based compensation expense	​	$	75,115	​	$	34,350

​

Stock Incentive Plan

In May 2022, our shareholders approved the Axon Enterprise, Inc. 2022 Stock Incentive Plan (the “2022 Plan”) authorizing an additional 2.5 million shares, plus remaining available shares under prior plans, for issuance under the 2022 Plan. Combined with the shares of our common stock available under our legacy stock incentive plans, there are 1.3 million shares of our common stock available for grant as of March 31, 2024.

Stock Repurchase Plan

In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our outstanding common stock subject to stock market conditions and corporate considerations. During the three months ended March 31, 2024 and 2023, no common shares were purchased under the program. As of March 31, 2024, $16.3 million remains available under the plan for future purchases. Any future purchases will be discretionary.

At-The-Market Equity Offering

During the year ended December 31, 2023, we sold 467,594 shares of our common stock under our “at-the-market” equity offering program (the “ATM”). We generated approximately $96.4 million in aggregate gross proceeds from sales under the ATM. Aggregate net proceeds from the ATM were $94.7 million after deducting related expenses, including commissions to the sales agent and issuance costs of $1.7 million. No shares were sold during the three months ended March 31, 2024.

We were authorized to sell up to a total of 3.0 million shares of our common stock under the ATM, with approximately 2.0 million shares remaining as of March 31, 2024. The ATM expired on April 20, 2024; however, we may amend and extend the program to facilitate the sales of the shares remaining from time to time. We intend to use the net proceeds from this offering program for general corporate purposes, which may include, among other things, providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our executive officers and other employees under our stock plans, to support our growth, and to acquire or invest in product lines, products, services, technologies or facilities.

Note 12 - Line of Credit

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

At March 31, 2024 and December 31, 2023, there were no borrowings under the line. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of March 31, 2024 we had letters of credit outstanding of approximately $7.5 million under the facility and available borrowing of $192.5 million, excluding amounts

available under the accordion feature. Advances under the line of credit bear interest at Term SOFR plus 1.25 to 1.75% per year determined in accordance with a pricing grid based on our net debt to earnings before interest expense, taxes, depreciation and amortization (“EBITDA”) ratio, which for the purposes of the credit agreement excludes investment interest income. “SOFR” is defined as a rate equal to the secured overnight financing rate as administered by the Federal Reserve Bank of New York or a successor administrator of the secured overnight financing rate.

We are required to comply with a net leverage ratio, defined as consolidated total indebtedness to EBITDA, of no greater than 3.50 to 1.00 based upon a trailing four fiscal quarter period. At March 31, 2024, our net leverage ratio was (0.15) to 1.00. Additionally, we must comply with a consolidated interest coverage ratio, defined as EBITDA to consolidated interest expense, of no less than 3.50 to 1.00 based upon a trailing four fiscal quarter period. At March 31, 2024, our consolidated interest coverage ratio was 51.03 to 1.00.

​

​

​

​

Note 13 - Commitments and Contingencies

Product Litigation

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

​

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

​

Antitrust Litigation and Inquiry

On October 6, 2023, the U.S. Federal Trade Commission (“FTC”) unilaterally dismissed its administrative enforcement complaint against Axon without consent decree or other condition. That complaint alleged that Axon’s May 2018 acquisition of an insolvent body-worn camera competitor, Vievu LLC (“Vievu”), was anticompetitive. Now pending in the District of New Jersey (Case No. 3:23-cv-7182) is a purported class action based primarily on the same unproven, dismissed FTC allegations that the Vievu acquisition substantially lessened competition in the body-worn camera systems market for large U.S. law enforcement agencies. The Township of Howell (NJ), the City of Augusta (ME) and the City of Baltimore (MD) filed their consolidated amended complaint on November 27, 2023, alleging Sherman and Clayton Act violations against both Axon and Safariland LLC, which sold Vievu to Axon. The complaint further alleges that an ancillary holster supply agreement between Axon and Safariland constituted an illegal restraint of trade in the long-range energy weapon market. Axon denies the allegations and is vigorously defending the case. Motion practice is underway on Axon’s motion to dismiss and motion to strike class allegations, with rulings unlikely in 2024. Discovery is stayed pending these rulings.

Axon also recently received a request for information from the Pennsylvania Office of Attorney General regarding this same consummated Vievu transaction. Axon intends to cooperate with any such investigation and work to resolve any concerns of the Commonwealth of Pennsylvania.

General

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

​

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

​

Off-Balance Sheet Arrangements

Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual performance terms are completed. At March 31, 2024, we had outstanding letters of credit issued under our credit facility of $7.5 million that are expected to expire throughout 2024 and 2025.

Note 14 – Accumulated Other Comprehensive Income (Loss)

The following tables reflect the changes in accumulated other comprehensive income (loss), net of tax (in thousands):

​	​	​	​	​	​	​	​	​	​
​	​	​	Unrealized Gains (Losses)	​	​	​	​	​	​
​	​	​	on Available-for-Sale	​	​	Foreign Currency	​	​
​	​	​	Investments	​	​	Translation	​	Total
Balance, December 31, 2023	​	$	(399)	​	​	(10,280)	​	$	(10,679)
Other comprehensive loss	​	​	(106)	​	​	(801)	​	​	(907)
Balance, March 31, 2024	​	$	(505)	​	$	(11,081)	​	$	(11,586)

​

​	​	​	​	​	​	​	​	​	​
​	​	​	Unrealized Gains (Losses)	​	​	​	​	​	​
​	​	​	on Available-for-Sale	​	​	Foreign Currency	​	​
​	​	​	Investments	​	​	Translation	​	Total
Balance, December 31, 2022	​	$	(1,251)	​	$	(5,928)	​	$	(7,179)
Other comprehensive income	​	​	184	​	​	1,676	​	​	1,860
Balance, March 31, 2023	​	$	(1,067)	​	$	(4,252)	​	$	(5,319)

​

​

Note 15 - Segment Data

Our operations comprise two reportable segments: the TASER segment and the Software and Sensors segment. In both segments, we report sales of products and services. Service revenue in both segments includes sales related to Axon Evidence. In the TASER segment, service revenue also includes digital subscription training content. In the Software and Sensors segment, service revenue also includes Axon Cloud revenue. Our Chief Executive Officer, who is our CODM, is not provided asset information, R&D expenses, or SG&A expenses by segment.

During the three months ended March 31, 2024, the segment measure of profit and loss used by the CODM was changed from gross margin to adjusted gross margin, defined as gross margin before non-cash stock-based compensation expense and amortization of acquired intangible assets. This change in segment measure allows the CODM to better assess operating results over time and is consistent with how the CODM evaluates our businesses. Accordingly, we have updated our segment disclosure for the three months ended March 31, 2023 to conform to the new presentation.

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

​

​

​	​	​	​	​	​	​
​	​	Three Months Ended March 31,
​	​	2024		​	2023
TASER segment net sales	​	$	178,748	​	$	134,282
Software and Sensors segment net sales	​	​	281,988	​	​	208,761
Total consolidated net sales	​	$	460,736	​	$	343,043
​	​	​	​	​	​	​
Adjusted gross margin	​	$	291,327	​	$	205,422
Stock-based compensation expense	​	​	29,595	​	​	1,320
Amortization of acquired intangible assets	​	​	1,686	​	​	—
Gross margin	​	$	260,046	​	$	204,102
Sales, general and administrative	​	​	152,669	​	​	116,567
Research and development	​	​	91,097	​	​	70,927
Interest income, net	​	​	10,374	​	​	9,666
Other income, net	​	​	139,066	​	​	15,610
Income before provision (benefit) for income taxes	​	$	165,720	​	$	41,884

​

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Note 16 – Business Acquisition

On January 31, 2024, we acquired the remaining 79.7% interest in Fusus, Inc. (“Fusus”), a global leader in real-time crime center technology, for total consideration transferred of approximately $241.3 million, subject to adjustment (the “step acquisition”). The acquisition expands our ability to aggregate live video, data and sensor feeds, which enhances situational awareness and investigative capabilities for our customers in public safety, education and enterprise. Total transaction costs related to the acquisition were $3.5 million for the period ending March 31, 2024. These transaction costs were expensed as incurred in selling, general and administrative expenses (“SG&A”) in our condensed consolidated statements of operations.

Our existing 20.3% interest had a fair value at the acquisition date of $63.3 million, which resulted in a non-taxable gain of $42.3 million. The gain is recorded in other income, net in our condensed consolidated statement of operations for the period ending March 31, 2024. Prior to the step acquisition, the fair value of the previously held investment was determined using Level 3 valuation techniques, which include inputs to the valuation methodology that are considered unobservable and significant to the fair value measurement.

The purchase price allocation is subject to revision during the measurement period pending final valuation procedures and related calculations. Based on the purchase price allocation, we recorded $250.7 million of goodwill, $72.9 million of identifiable intangible assets, and $8.1 million in net tangible liabilities, excluding deferred taxes. We recorded a net deferred tax liability of $10.9 million.

With the assistance of third-party valuation experts, we calculated the fair values of intangible assets using the multi-period excess earnings method for the acquired developed technology and the with and without method for customer relationships. The weighted average amortization period of the acquired intangible assets was 7.5 years.

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

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Note 17 – Subsequent Event

On April 30, 2024, we entered into a definitive agreement to acquire the remaining outstanding stock of Dedrone Holdings, Inc. (“Dedrone”) for approximately $400.0 million, subject to customary purchase price adjustments. Axon currently holds an approximately 20% ownership interest in Dedrone. Dedrone is a market leader in air space security combining hardware sensors with software to detect, identify, track, and mitigate drones. The proposed acquisition represents alignment to our mission and positions Axon to accelerate the next generation of drone and air space solutions. The proposed transaction would be considered a “step acquisition” under GAAP whereby our ownership interest in Dedrone held before the proposed acquisition is required to be remeasured to fair value as of the closing date of the acquisition. Closing of the acquisition is contingent upon customary closing conditions, including regulatory approval.

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