Axon Enterprise 10-Q 2025-03-31

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025

or

o			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to __________

Commission File Number: 001-16391

			Axon Enterprise, Inc.
			(Exact name of registrant as specified in its charter)

Delaware			86-0741227
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)
17800 North 85th Street
Scottsdale, Arizona			85255
(Address of principal executive offices)			(Zip Code)

(480) 991-0797

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class			Trading Symbol(s)			Name of each exchange on which registered
Common Stock, $0.00001 Par Value			AXON			The NASDAQ Stock Market LLC

---

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer			x			Accelerated filer			o
Non-accelerated Filer			o			Smaller reporting company			o
						Emerging growth company			o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x

The number of shares of the registrant’s common stock outstanding as of May 1, 2025 was 77,850,812.

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AXON ENTERPRISE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2025

									Page
Special Note Regarding Forward-Looking Statements									ii
PART I - FINANCIAL INFORMATION									1
			Item 1. Financial Statements (unaudited)						1
						Consolidated Balance Sheets			2
						Consolidated Statements of Operations and Comprehensive Income			3
						Consolidated Statements of Stockholders’ Equity			4
						Consolidated Statements of Cash Flows			5
						Condensed Notes to Consolidated Financial Statements			6
			Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations						32
			Item 3. Quantitative and Qualitative Disclosures About Market Risk						42
			Item 4. Controls and Procedures						42
PART II - OTHER INFORMATION									43
			Item 1. Legal Proceedings						43
			Item 1A. Risk Factors						43
			Item 2. Unregistered Sales of Equity Securities and Use of Proceeds						66
			Item 3. Defaults Upon Senior Securities						66
			Item 4. Mine Safety Disclosures						66
			Item 5. Other Information						67
			Item 6. Exhibits						67
			SIGNATURES						69

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Special Note Regarding Forward-Looking Statements

Statements contained in this Quarterly Report on Form 10-Q 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. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. This Quarterly Report on Form 10-Q lists various important factors that could cause actual results to differ materially from historical and expected results, which are set forth more fully in Part II, Item 1A. These factors are intended as cautionary statements for investors within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. Readers can find them under the heading “Risk Factors” in this Quarterly Report on Form 10-Q, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 8-K, 10-Q and 10-K reports to the Securities and Exchange Commission (“SEC”). Our filings with the SEC may be accessed at the SEC’s web site at www.sec.gov.

ii

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PART I - FINANCIAL INFORMATION

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AXON ENTERPRISE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

			March 31, 2025						December 31, 2024
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents			$	1,092,938					$	454,844
Short-term investments			1,099,230						333,235
Marketable securities			174,870						198,270
Accounts and notes receivable, net of allowance of $3,204 and $3,322 as of March 31, 2025 and December 31, 2024, respectively			600,371						547,572
Contract assets, net			373,707						367,929
Inventory			279,669						265,316
Prepaid expenses and other current assets			155,804						130,315
Total current assets			3,776,589						2,297,481
Property and equipment, net			259,869						247,324
Deferred tax assets, net			335,742						304,282
Intangible assets, net			168,834						175,157
Goodwill			755,882						756,838
Long-term notes receivable, net			3,318						3,460
Long-term contract assets, net			133,551						119,876
Strategic investments			413,693						332,550
Other long-term assets			235,681						237,620
Total assets			$	6,083,159					$	4,474,588
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable			$	97,670					$	71,955
Accrued liabilities			266,604						279,193
Current portion of deferred revenue			661,116						612,955
Current portion of notes payable, net			278,915						680,289
Customer deposits			21,645						20,626
Other current liabilities			10,672						12,857
Total current liabilities			1,336,622						1,677,875
Deferred revenue, net of current portion			348,614						360,685
Liability for unrecognized tax benefits			28,510						25,007
Long-term deferred compensation			18,691						15,877
Long-term lease liabilities			40,016						41,383
Long-term notes payable, net			1,727,797						—
Other long-term liabilities			27,056						26,096
Total liabilities			3,527,306						2,146,923
Commitments and contingencies (Note 14)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively			—						—
Common stock, $0.00001 par value; 200,000,000 shares authorized, 98,068,375 shares issued and 77,848,148 shares outstanding as of March 31, 2025, and 200,000,000 shares authorized, 96,839,558 shares issued and 76,619,331 shares outstanding as of December 31, 2024			1						1
Additional paid-in capital			1,829,755						1,689,781
Treasury stock at cost, 20,220,227 shares as of March 31, 2025 and December 31, 2024			(155,947)						(155,947)
Retained earnings			899,994						812,014
Accumulated other comprehensive loss			(17,950)						(18,184)
Total stockholders’ equity			2,555,853						2,327,665
Total liabilities and stockholders’ equity			$	6,083,159					$	4,474,588

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

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AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

(in thousands, except per share data)

(unaudited)

			Three Months Ended March 31,
			2025						2024
									As Restated
Net sales from products			$	340,896					$	270,424
Net sales from services			262,737						189,447
Net sales			603,633						459,871
Cost of product sales			170,181						152,160
Cost of service sales			67,713						49,083
Cost of sales			237,894						201,243
Gross margin			365,739						258,628
Operating expenses:
Selling, general and administrative			223,509						151,075
Research and development			151,023						91,097
Total operating expenses			374,532						242,172
(Loss) income from operations			(8,793)						16,456
Interest income			10,604						12,130
Interest expense			(7,821)						(1,756)
Other income, net			114,401						139,066
Income before provision for income taxes			108,391						165,896
Provision for income taxes			20,411						32,544
Net income			$	87,980					$	133,352
Net income per common and common equivalent shares:
Basic			$	1.14					$	1.77
Diluted			$	1.08					$	1.73
Weighted average number of common and common equivalent shares outstanding:
Basic			76,890						75,355
Diluted			81,484						77,132
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income			$	87,980					$	133,352
Foreign currency translation adjustments			358						(801)
Unrealized loss on available-for-sale investments			(124)						(106)
Comprehensive income			$	88,214					$	132,445

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

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AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

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The following discussion and analysis of our financial condition as of March 31, 2025, and results of operations for the three months ended March 31, 2025 and 2024, should be read in conjunction with the unaudited consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and related notes in our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024, filed with the SEC on May 7, 2025. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in such forward-looking statements as a result of certain factors, including but not limited to those described under “Part II, Item 1A. Risk Factors.” See also “Special Note Regarding Forward-Looking Statements” on page ii of this Quarterly Report on Form 10-Q.

Overview

Axon is a technology leader in global public safety. Our moonshot goal is to cut gun-related deaths between police and the public in the United States in half by 2033. Axon is building the public safety operating system of the future by integrating a suite of hardware devices and cloud software solutions that not only revolutionize modern policing but also cater to federal agencies, corrections, justice and enterprise-level security needs. Axon’s suite includes cloud-hosted digital evidence management solutions, productivity and real-time operations software, body cameras, in-car cameras, TASER energy devices, drone and robotic security, and training solutions.

Effective in the first quarter of 2025, we realigned our business to better reflect our continued growth and expansion of product, software and service offerings (the “Segment Realignment”). Previously reported within two reportable segments, TASER and Software and Sensors, we prospectively realigned our business in a manner that provides increased transparency and distinction between our hardware and software and services components. As a result of the Segment Realignment and effective as of the three months ended March 31, 2025, our financial results are reported in two reportable segments, Connected Devices and Software & Services. As a result of the Segment Realignment, we have recast our segment disclosures for the three months ended March 31, 2024 to conform to the new presentation.

Our revenues for the three months ended March 31, 2025 were $603.6 million, an increase of $143.8 million, or 31.3%, from the comparable period in the prior year. We had loss from operations of $8.8 million, compared to income from operations of $16.5 million for the same period in the prior year. Gross margin dollars increased $107.1 million and increased as a percentage of revenue to 60.6% from 56.2% compared to the three months ended March 31, 2024. The increase was primarily driven by higher stock-based compensation expense in the comparable period. Excluding the impacts of stock-based compensation expense and intangibles amortization in cost of goods sold, adjusted gross margin increased to 63.6% for three months ended March 31, 2025 compared to 63.2% for the same period in the prior year, primarily due to higher software revenue mix. Operating expenses increased by $132.4 million, reflecting increased headcount and an increase in stock-based compensation expense. Net income of $88.0 million included net realized and unrealized gains of $167.3 million related to our strategic investments, offset by a noncash unrealized loss of $23.4 million related to our marketable securities and inducement expense of $28.7 million associated with the early repurchase of a portion of our 2027 Notes, as discussed further within Note 10. Net income of $133.4 million for the comparable period in the prior year included a realized gain of $42.3 million related to our acquisition in Fusus, an unrealized gain of $75.6 million related to a strategic investment, and a noncash unrealized gain of $21.8 million on our investment in marketable securities.

Certain prior period amounts previously reported on our consolidated financial statements have been restated to correct for immaterial errors, as described in Note 1 and Note 18 to our consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

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Results of Operations

The following table presents data from our consolidated statements of operations as well as the percentage relationship to total net sales of items included in our consolidated statements of operations (dollars in thousands):

			Three Months Ended March 31,
			2025												2024
Net sales from products			$	340,896					56.5		%				$	270,424					58.8		%
Net sales from services			262,737						43.5						189,447						41.2
Net sales			603,633						100.0						459,871						100.0
Cost of product sales			170,181						28.2						152,160						33.1
Cost of services sales			67,713						11.2						49,083						10.7
Cost of sales			237,894						39.4						201,243						43.8
Gross margin			365,739						60.6						258,628						56.2
Operating expenses:
Selling, general and administrative			223,509						37.0						151,075						32.9
Research and development			151,023						25.0						91,097						19.8
Total operating expenses			374,532						62.0						242,172						52.7
(Loss) income from operations			(8,793)						(1.4)						16,456						3.5
Interest income			10,604						1.8						12,130						2.6
Interest expense			(7,821)						(1.3)						(1,756)						(0.4)
Other income, net			114,401						19.0						139,066						30.2
Income before provision for income taxes			108,391						18.1						165,896						35.9
Provision for income taxes			20,411						3.4						32,544						7.1
Net income			$	87,980					14.7		%				$	133,352					28.8		%

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

			Three Months Ended March 31,
			2025												2024
United States			$	529,383					88		%				$	391,541					85		%
Other countries			74,250						12						68,330						15
Total			$	603,633					100		%				$	459,871					100		%

International revenue increased compared to the prior year comparative period, primarily driven by increased sales in our Americas region (i.e., South America and Canada).

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Net Sales

As a result of the Segment Realignment, we have updated and recast our disaggregated revenue categories. Net sales by product line were as follows (dollars in thousands):

			Three Months Ended March 31,																								Dollar Change						Percent Change
			2025												2024
Connected Devices segment:
TASER (1)			$	195,495					32.4		%				$	164,599					35.8		%				$	30,896					18.8		%
Personal Sensors (2)			88,405						14.7						68,000						14.8						20,405						30.0
Platform Solutions (3)			56,996						9.4						37,825						8.2						19,171						50.7
Total Connected Devices segment			340,896						56.5						270,424						58.8						70,472						26.1
Total Software and Services segment			262,737						43.5						189,447						41.2						73,290						38.7
Total net sales			$	603,633					100.0		%				$	459,871					100.0		%				$	143,762					31.3		%

(1)'TASER' includes TASER handles, cartridges and related extended warranties.

(2)'Personal Sensors' primarily includes body cameras and accessories, signal sidearm, and related extended warranties.

(3)'Platform Solutions' primarily includes interview room, fleet in-car video, fixed cameras, drones and counter-drone equipment, virtual reality training hardware, and related extended warranties.

Net sales for the Connected Devices segment increased 26.1% for the three months ended March 31, 2025 as compared to the prior-year quarter. The increase of $30.9 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $20.4 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $19.2 million increase in Platform Solutions is primarily driven by higher volume for virtual reality training and counter-drone equipment.

Net sales for the Software and Services segment increased 38.7% for the three months ended March 31, 2025 as compared to the prior-year quarter. The increase in the aggregate number of users and growing adoption of our premium add-on features by existing customers drove the majority of the increase of $73.3 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment increased to 50.1% from 43.7% for the three months ended March 31, 2025 and 2024, respectively. The increase was primarily due to higher stock-based compensation in the comparable period. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense and intangibles amortization, was 52.8% for the three months ended March 31, 2025, compared to 54.1% for the same period in 2024. The decrease is primarily driven by higher mix of Personal Sensors and Platform Solutions which generally have a lower gross margin than TASER devices.

As a percentage of net sales, gross margin for the Software and Services segment increased to 74.2% from 74.1% for the three months ended March 31, 2025 and 2024, respectively. The increase was primarily due to higher stock-based compensation expense in the comparable period. Adjusted gross margin for Software and Services segment, which excludes stock-based compensation expense and intangibles amortization, increased to 77.7% for the three months ended March 31, 2025, compared to 76.1% for the same period in 2024 due to higher software mix.

Selling, General and Administrative Expenses

SG&A expenses were comprised as follows (dollars in thousands):

			Three Months Ended March 31,												Dollar Change						Percent Change
			2025						2024
Total selling, general and administrative expenses			$	223,509					$	151,075					$	72,434					47.9		%
As a percentage of net sales			37.0%						32.9%

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Stock-based compensation expense increased $48.2 million in comparison to the prior-year comparable period, which was primarily related to the 2024 Employee XSP and the 2024 CEO Performance Award that were approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount. As of March 31, 2025, we consider some of the tranches probable and will recognize the expense ratably over their respective expected vesting periods. This may result in volatility and higher upfront expense recognition and is subject to change based on periodic probability assessments.

Salaries, benefits and bonus expense increased $12.7 million in comparison to the prior-year comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $3.1 million in comparison to the prior-year comparable period, which was primarily attributable to increased commissions and in-person events.

Research and Development Expenses

R&D expenses were comprised as follows (dollars in thousands):

			Three Months Ended March 31,												Dollar Change						Percent Change
			2025						2024
Total research and development expenses			$	151,023					$	91,097					$	59,926					65.8		%
As a percentage of net sales			25.0		%				19.8		%

Stock-based compensation expense increased $33.6 million in comparison to the prior-year comparable period, which was primarily related to the 2024 Employee XSP that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount. As of March 31, 2025, we consider the vesting of some of the tranches probable and will recognize the expense ratably over their respective expected vesting periods. This may result in volatility and higher upfront expense recognition and is subject to change based on periodic probability assessments.

Salaries, benefits and bonus expense increased $16.7 million in comparison to the prior-year comparable period, which was primarily attributable to an increase in headcount and higher wages.

Interest Income, Net

Interest income, net, was as follows (in thousands):

			Three Months Ended March 31,
			2025						2024
Interest income			$	10,604					$	12,130
Interest expense (1)			(7,821)						(1,756)
Total interest income, net			$	2,783					$	10,374

(1)Interest expense increased in comparison to the prior-year comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.

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Other Income, Net

Other income, net, was as follows (in thousands):

			Three Months Ended March 31,
			2025						2024
Realized and unrealized gain on fair value adjustments of strategic investments, net			$	167,321					$	117,931
Unrealized gain (loss) on marketable securities, net			(23,400)						21,780
Gain (loss) on foreign currency transactions, net			(803)						88
Induced conversion of convertible debt (1)			(28,666)						—
Other, net			(51)						(733)
Other income, net			$	114,401					$	139,066

(1)Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes, as discussed further within Note 10.

Provision for Income Taxes

The effective tax rate is 18.8% for the three months ended March 31, 2025, compared to 19.6% for the three months ended March 31, 2024. The decrease was primarily attributable to higher R&D tax credits and discrete benefit for excess tax benefits from stock-based compensation. These were partially offset by higher tax expense related to the executive compensation limitation under IRC Section 162(m), increased unrecognized tax benefits, state income taxes, a partially non-deductible expense related to the induced conversion of our 2027 Notes, and the absence of a prior-year gain related to an investment transaction not recognized for tax. The overall change in the effective tax rate also reflects the impact of a lower pre-tax book income base in the current period, which magnifies the relative effect of permanent and discrete items.

Provision for income taxes and effective tax rates were as follows (dollars in thousands):

			Three Months Ended March 31,
			2025						2024						Change
Income before provision for income taxes			$	108,391					$	165,896					$	(57,505)
Provision for income taxes			$	20,411					$	32,544					$	(12,133)
Effective tax rate			18.8		%				19.6		%				(0.8)		%

Net Income

We recorded net income of $88.0 million for the three months ended March 31, 2025 compared to net income of $133.4 million for the same period in 2024. Net income per basic share was $1.14 for the three months ended March 31, 2025 compared to $1.77 net income per basic share for the same period in 2024. Net income per diluted share was $1.08 for the three months ended March 31, 2025 compared to $1.73 net income per diluted share for the comparable period in 2024.

Non-GAAP Measures

We utilize certain non-GAAP financial measures such as EBITDA, adjusted EBITDA, and adjusted gross margin as defined below to enhance understanding of our financial results and related measures. We have adjusted for expenses that we believe are not indicative of our core operating results, including stock-based compensation expense and amortization of acquired intangible assets. To improve comparability, prior periods have been conformed to the current period presentation. Our management uses these non-GAAP financial measures in evaluating our operating performance in comparison to prior periods. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance, and when planning and forecasting our future periods. A reconciliation of GAAP to the non-GAAP financial measures is presented below.

• EBITDA (most comparable GAAP measure: Net income) - Earnings before interest expense, investment interest income, income taxes, depreciation and amortization.

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• Adjusted EBITDA (most comparable GAAP measure: Net income) – Earnings before interest expense; investment interest income; income taxes; depreciation; amortization; noncash stock-based compensation expense; fair value adjustments related to strategic investments and marketable securities; debt inducement expense associated with the early repurchase of a portion of our 2027 Notes; transaction and integration costs related to strategic investments and acquisitions; inventory step-up amortization related to acquisitions; certain litigation costs and recoveries related to (1) antitrust cases we consider to be non-recurring and outside of our core operating results and (2) litigation matters for acquired companies that were unresolved at the date of the acquisition; and other unusual, non-recurring pre-tax items that are not considered representative of our underlying operating performance (listed in the tables below).

• Adjusted gross margin (most comparable GAAP measure: Gross margin) – Gross margin before noncash stock-based compensation expense, amortization of acquired intangible assets, and inventory step-up amortization related to acquisitions.

Although these non-GAAP financial measures are not consistent with GAAP, management believes investors will benefit by referring to these non-GAAP financial measures when assessing our operating results, as well as when forecasting and analyzing future periods. However, management recognizes that:

• these non-GAAP financial measures are limited in their usefulness and should be considered only as a supplement to our GAAP financial measures;

• these non-GAAP financial measures should not be considered in isolation from, or as a substitute for, our GAAP financial measures;

• these non-GAAP financial measures should not be considered to be superior to our GAAP financial measures; and

• these non-GAAP financial measures were not prepared in accordance with GAAP and investors should not assume that the non-GAAP financial measures presented in this Quarterly Report on Form 10-Q were prepared under a comprehensive set of rules or principles.

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EBITDA and adjusted EBITDA reconcile to net income as follows (in thousands):

			Three Months Ended
			March 31, 2025						December 31, 2024						March 31, 2024
Net income			$	87,980					$	135,184					$	133,352
Depreciation and amortization			19,195						17,489						11,564
Interest expense			7,821						1,825						1,756
Investment interest income			(10,604)						(7,286)						(12,130)
Provision for (benefit from) income taxes			20,411						(50,619)						32,544
EBITDA			$	124,803					$	96,593					$	167,086
Non-GAAP adjustments:
Stock-based compensation expense			140,239						130,888						75,115
Unrealized and realized gains on strategic investments and marketable securities, net			(143,921)						(39,432)						(97,419)
Realized gains on previously held minority interests acquired in business combinations, net			—						(51,627)						(42,292)
Debt inducement expense			28,666						—						—
Transaction costs related to strategic investments and acquisitions			2,727						2,104						6,357
Loss on disposal, abandonment, and impairment of property, equipment and intangible assets, net			—						—						—
Loss recoveries			—						—						—
Inventory step-up amortization			607						609						—
Litigation costs and related recoveries			2,049						1,537						224
Payroll taxes related to 2018 CEO Performance Award option exercises			—						918						—
Adjusted EBITDA			$	155,170					$	141,590					$	109,071

As a result of the Segment Realignment, we have recast adjusted gross margin for the three months ended March 31, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

			Three Months Ended
			March 31, 2025																		March 31, 2024
			Connected Devices						Software and Services						Total						Connected Devices						Software and Services						Total
Gross margin			$	170,715					$	195,024					$	365,739					$	118,264					$	140,364					$	258,628
Stock-based compensation expense			7,476						5,411						12,887						27,827						1,768						29,595
Amortization of acquired intangible assets			1,337						3,626						4,963						325						1,963						2,288
Inventory step-up amortization			607						—						607						—						—						—
Adjusted gross margin			$	180,135					$	204,061					$	384,196					$	146,416					$	144,095					$	290,511
Gross margin %			50.1		%				74.2		%				60.6		%				43.7		%				74.1		%				56.2		%
Adjusted gross margin %			52.8		%				77.7		%				63.6		%				54.1		%				76.1		%				63.2		%

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Liquidity and Capital Resources

Summary

			March 31, 2025						December 31, 2024						Dollar Change
Cash and cash equivalents			$	1,092,938					$	454,844					$	638,094
Available-for-sale investments			1,099,230						333,235						765,995
Total			$	2,192,168					$	788,079					$	1,404,089

Our most significant source of liquidity continues to be funds generated by operating activities and available cash and cash equivalents and short-term investments. As of March 31, 2025, we had $1.1 billion of cash and cash equivalents, an increase of $638.1 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of March 31, 2025, we had $1.1 billion of available-for-sale investments, an increase of $766.0 million from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details on the issuance.

In addition, our Credit Agreement is available for additional working capital needs or investment opportunities. The Credit Agreement provides for a senior unsecured multi-currency revolving credit facility in an aggregate principal amount of up to $300.0 million, $50.0 million of which is available for the issuance of letters of credit. As of March 31, 2025, and December 31, 2024, respectively, no amounts were drawn under the Credit Agreement. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of March 31, 2025, we had letters of credit outstanding of approximately $8.7 million under the facility and available borrowing of $291.3 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Credit Agreement and outstanding letters of credit.

We also have an aggregate of $1.75 billion of Senior Notes outstanding. As of March 31, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 12% of our total revenue for the three months ended March 31, 2025, and approximately 18% and 6% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of March 31, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details related to our Senior Notes.

We believe we have access to additional financing. However, there is no assurance that such funding will be available on terms acceptable to us, or at all. We believe that our sources of funding will be sufficient to satisfy our currently anticipated cash requirements, including capital expenditures, working capital requirements, potential acquisitions or investments, income and payroll tax payments for net-settled stock awards, and other liquidity requirements through at least the next 12 months.

Going forward, we expect to continue to be an opportunistic issuer of debt securities and may issue new debt securities from time to time to fund our growth or refinance future debt maturities, among other things. In addition, from time to time, we may acquire our debt securities through open market purchases, redemptions, privately negotiated transactions, tender offers, exchange offers or otherwise, upon such terms and at such prices as we may from time to time determine, for cash or other consideration.

Cash Flows

The following table summarizes our cash flows from operating, investing and financing activities (in thousands):

			Three Months Ended March 31,												Dollar Change
			2025						2024
Operating activities			$	25,794					$	(15,938)					$	41,732
Investing activities			(702,217)						(174,044)						(528,173)
Financing activities			1,313,226						(2,710)						1,315,936
Effect of exchange rate changes on cash and cash equivalents			1,192						(1,978)						3,170
Net increase (decrease) in cash and cash equivalents and restricted cash			$	637,995					$	(194,670)					$	832,665

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Operating activities

Net cash provided by operating activities was $25.8 million for the first three months of 2025, compared to $(15.9) million in the comparable period in the prior year. The $41.7 million increase is due to changes in the following (in thousands): 

			Three Months Ended March 31,												Dollar Change
			2025						2024
Net income			$	87,980					$	133,352					$	(45,372)
Stock-based compensation			140,239						75,115						65,124
Fair value adjustments on strategic investments and marketable securities, net			(143,921)						(139,711)						(4,210)
Deferred income taxes			(48,768)						20,670						(69,438)
Debt inducement expense			28,666						—						28,666
Inventory and accounts payable			(8,375)						(87,914)						79,539
Receivables and contract assets			(73,565)						(56,737)						(16,828)
Deferred revenue			33,505						19,121						14,384
Other, net			10,033						20,166						(10,133)
Net cash provided by (used in) operating activities			$	25,794					$	(15,938)					$	41,732

Net cash provided by operating activities consisted of net income of $88.0 million, a net add-back of non-cash income statement items of $9.0 million and a $71.2 million net change in operating assets and liabilities. Primary drivers of the non-cash items include stock-based compensation expense for employee equity programs, debt inducement expense related to the induced conversion for our 2027 Notes, fair value adjustments for the net realized and unrealized gains on our strategic investments and marketable securities, and deferred income taxes. The realized and unrealized gains on our strategic investments and related warrants were primarily related to an observable price change and subsequent sale of one of our strategic investments. The change in accounts and notes receivable was largely due to increased sales. This was partly offset by the change in deferred revenue due to the timing of billing events. The change in inventory and accounts payable was largely due to advanced raw material purchases for Axon Body 4 and TASER 10 CEDs to support future sales. The change in deferred income taxes was primarily driven by non-taxable unrealized net investment gain and additional GAAP expense for unvested stock-based compensation.

Investing activities

Net cash used in investing activities was $702.2 million for the three months ended March 31, 2025 compared to cash used in investing activities of $174.0 million for the comparable period in the prior year. The net investing cash outflow is driven by $1.1 billion of investment purchases, including $203.4 million related to our strategic investments, and $24.9 million for purchases of property and equipment, net of proceeds. Cash outflow was partially offset by $110.9 million of proceeds from calls, maturities and sales of available-for-sale investments and $290.9 million of proceeds from the sale of strategic investments. The net cash outflow is primarily driven by greater available-for-sale and strategic investment activity in the current period, when contrasted with the prior comparable period.

Financing activities

Net cash provided by financing activities was $1.3 billion for the three months ended March 31, 2025 compared to cash used by financing activities of $2.7 million for the comparable period in the prior year. Financing cash inflow was driven by gross proceeds of $1.8 billion from the Senior Notes issuance. Gross proceeds from the issuance were partially offset by $407.5 million of principal payments related to the induced conversion for our 2027 Notes, $24.2 million of transaction costs related to the induced conversion, debt issuance, and revolver modifications, and payments totaling $5.0 million for income and payroll taxes on behalf of employees who net-settled stock awards during the period.

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Critical Accounting Estimates

Our management’s discussion and analysis of our financial condition and results of operation is based on our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosures. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances, and we evaluate our estimates and assumptions on an ongoing basis. While we do not believe that a change in these estimates is reasonably likely, there can be no assurance that our actual results will not differ from these estimates.

Our critical accounting estimates are discussed in our amended 2024 Annual Report on Form 10-K/A for the fiscal year ended December 31, 2024. There have been no significant changes to these critical accounting estimates for the three months ended March 31, 2025. Refer to Note 1 in Part I, Item 1 of this Quarterly Report on Form 10-Q for any additional details regarding our significant accounting policies.

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Interest Rate Risk

We typically invest in a limited number of financial instruments, consisting principally of investments in money market accounts, certificates of deposit, and corporate and municipal bonds with a typical long-term debt rating of “A” or better by any nationally recognized statistical rating organization, denominated in U.S. dollars. All of our cash equivalents and investments are treated as “available-for-sale”. To quantify our interest rate risk exposure, we perform a sensitivity analysis based on hypothetical changes in interest rates. Based on investment positions as of March 31, 2025, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $2.1 million decline in the fair market value of the portfolio. Such losses would only be realized if we sold the investments prior to maturity.

Additionally, we have access to a $300.0 million line of credit borrowing facility which bears interest at SOFR plus 1.25 to 1.75% per year determined in accordance with a pricing grid based on our net leverage ratio and consolidated interest coverage ratio. Under the terms of the line of credit, available borrowings are reduced by outstanding letters of credit, which totaled $8.7 million at March 31, 2025. At March 31, 2025, there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was $291.3 million. We have not borrowed any funds under the line of credit since its inception; however, should we need to do so in the future, such borrowings could be subject to adverse or favorable changes in the underlying interest rate.

Exchange Rate Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, in each case compared to the U.S. dollar, related to transactions by our foreign subsidiaries. The majority of our sales to international customers are transacted in foreign currencies and therefore are subject to exchange rate fluctuations on these transactions. The cost of our products to our customers increases when the U.S. dollar strengthens against their local currency, and we may have more sales and expenses denominated in foreign currencies in future years which could increase our foreign exchange rate risk. Additionally, intercompany sales to our non-U.S. dollar functional currency international subsidiaries are transacted in U.S. dollars which could increase our foreign exchange rate risk caused by foreign currency transaction gains and losses.

To date, we have not engaged in any currency hedging activities. However, we may enter into foreign currency forward and option contracts with financial institutions to protect against foreign exchange risks associated with certain existing assets and liabilities, certain firmly committed transactions, forecasted future cash flows and net investments in foreign subsidiaries. However, we may choose not to hedge certain foreign exchange exposures for a variety of reasons, including, but not limited to, the prohibitive economic cost of hedging particular exposures. As such, fluctuations in currency exchange rates could harm our business in the future.

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer and Chief Financial Officer are responsible for the evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q. Our disclosure controls and procedures are designed to ensure that information we are required to disclose in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2025 due to unremediated material weaknesses in our internal control over financial reporting as disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024.

Remediation Efforts to Address the Material Weaknesses

With respect to the material weaknesses, management, under the oversight of the Audit Committee, is in the process of implementing remediation plans in response to the identified material weaknesses. Refer to Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A for additional details relating to the remediation plans. While we have taken steps to implement our remediation plans, the material weakness cannot be considered remediated until the applicable controls have

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operated for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

Changes in Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The discussion in Note 14 to our consolidated financial statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q is incorporated by reference herein.

Risk Factor Summary

The following is only a summary of the principal risks that may materially adversely affect our business, financial condition, results of operations and cash flows. The following should be read in conjunction with the more complete discussion of the risks we face, which are set forth more fully below.

Strategic Risks

• We substantially depend on acceptance of our products and services by law enforcement agencies throughout the world. If law enforcement agencies do not continue to purchase and use our products and services, our business prospects, operating results and financial condition will be materially adversely affected.

• We substantially depend on sales of our CEDs, and if these products do not continue to be widely accepted, our business prospects, operating results and financial condition will be diminished.

• If we are unable to design, introduce, sell and deploy new products or new product features successfully, our business and financial results could be adversely affected.

• We face risks associated with rapid technological change and new competing products.

• Our future success depends on our ability to expand sales through direct sales and distributors and our inability to increase direct sales or recruit new distributors would negatively affect our sales.

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

• Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute shareholder value, and adversely affect our operating results.

• We may not successfully manage our growth or plan for future growth.

• We are highly dependent on the services of our executive officers, including Patrick W. Smith, our Chief Executive Officer. Our failure to retain executive officers could adversely impact our business.

Operational Risks

• Unavailability of materials or higher costs could adversely affect our financial results.

• Material adverse developments in domestic and global economic conditions, or the occurrence of other sufficiently disruptive world events, could materially adversely affect our revenue and results of operations.

• If demand for our products increases, our future success will depend on our ability to manage our growth and to increase manufacturing production capacity.

• Delays in product development schedules could adversely affect our revenues and cash flows.

• We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no revenue in return.

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• If our security measures or those of our third-party providers, including cloud storage providers, are breached, resulting in unauthorized access to our and our customers’ data, it could undermine the confidence in our network, data centers and services, leading to reduced customer use of our products and services and significant legal and financial exposure and liabilities.

• Catastrophic events could materially adversely affect our business prospects, operating results and financial condition.

• 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.

• Defects or disruptions in our services could impact demand for our services and subject us to substantial liability.

• Defects in our products could reduce demand for our products or result in product recalls and result in a loss of sales, delay in market acceptance and damage to our reputation.

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

• We depend on our ability to attract and retain our key management, sales and technical personnel.

• Failure to comply with federal, state, or local regulations applicable to our firearm product, the TASER 10 CED, could result in governmental actions or litigation, potentially harming our business prospects, operating results, and financial condition.

• Failure to maintain effective internal control over financial reporting may adversely affect our ability to report our financial condition and operating results in a timely and accurate manner, which may cause investor confidence to diminish and the value of our common stock to decline.

• Our revision and our restatement of previously issued consolidated financial statements may adversely affect investor confidence and could result in regulatory actions and stockholder litigation.

Financial Risks

• An increasing percentage of our revenue is derived from subscription billing arrangements that may result in delayed cash collections and may increase customer credit risk on receivables and contract assets.

• Our gross margin depends 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 fluctuate.

• Revenue for our Software as a Service (“SaaS”) products is recognized over multi-year contract terms, which may delay the reflection of new business in our operating results.

• Most of our end-user customers are subject to budgetary and political constraints, which may delay or prevent sales, result in cancellations, or lead to the non-renewal of contracts.

• The open bidding process introduces uncertainty in securing future contract awards.

• We hold the majority of our cash balances, some of which are not insured, at three depository institutions.

• Stock transactions may have a material, unpredictable impact on our operating results and may result in dilution to existing shareholders.

• Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local currencies.

• Unanticipated changes in our effective tax rate and additional tax liabilities could adversely affect our operating results and financial condition.

• Our revenue and operating results may fluctuate unexpectedly from quarter-to-quarter, which could impact our stock price.

• 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.

Legal and Compliance Risks

• We may face personal injury, wrongful death, product liability and other liability claims that harm our reputation and adversely affect our business prospects, operating results and financial condition.

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• Other litigation, government inquiries and regulatory actions may result in significant costs and judgments and divert management attention from our business.

• We have in the past and may in the future be subject to intellectual property infringement and other claims, which could incur substantial litigation costs, result in significant damages awards, inhibit our use of certain technologies, and divert management attention from our business.

• If we are unable to protect our intellectual property, the value of our brands and products may decrease and we may lose our competitive market advantage.

• 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 rights.

• A variety of new and existing laws and/or interpretations could materially and adversely affect our business.

• Uncertainties with complex U.S. federal, state and local and foreign proc

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The table below describes the contracts, instructions or written plans for the purchase or sale of securities adopted by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended March 31, 2025, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).

Name and Title						Adoption Date						Expiration Date						Aggregate Number of Securities to be Sold**(1)**
Jeffrey Kunins, Chief Product Officer and Chief Technology Officer						March 10, 2025						December 15, 2025						15,977
Jennifer Mak, Chief Accounting Officer						March 14, 2025						February 27, 2026						8,768

(1)Reflects the maximum number of shares to be sold, excluding the effect of shares withheld for taxes.

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

3.1			Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q, filed August 9, 2022)
3.2			Bylaws, as amended and restated (incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K, filed December 21, 2023)
4.1			Indenture relating to the 2030 Senior Notes, dated as of March 11, 2025, between Axon Enterprise, Inc. and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K, filed March 11, 2025)
4.2			Indenture relating to the 2033 Senior Notes, dated as of March 11, 2025, between Axon Enterprise, Inc. and U.S. Bank Trust Company, National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K, filed March 11, 2025)
4.3			Form of 6.125% Senior Notes due 2030 (included as Exhibit A to the Indenture relating to the 2030 Notes filed herewith as Exhibit 4.1)
4.4			Form of 6.250% Senior Notes due 2033 (included as Exhibit A to the Indenture relating to the 2033 Notes filed herewith as Exhibit 4.2)
10.1+*			Executive Employment Agreement by and between Axon Enterprise, Inc. and Cameron Brooks, dated April 12, 2024
10.2			Amendment No. 1, dated March 11, 2025, amending the Credit Agreement dated December 15, 2022, among, the Company, the Lenders party thereto and the Administrative Agent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed March 11, 2025)
31.1*			Principal Executive Officer Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a)
31.2*			Principal Financial Officer Certification pursuant to Rule 13a-14(a) or Rule 15d-14(a)
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 2002
101.INS*			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH*			Inline XBRL Taxonomy Extension Schema Document
101.CAL*			Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*			Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*			Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE*			Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*			The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2025, formatted in Inline XBRL

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+Management contract or compensatory plan or arrangement

*Filed herewith

**Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AXON ENTERPRISE, INC.
Date:			May 7, 2025
						By:			/s/ PATRICK SMITH
									Chief Executive Officer
									(Principal Executive Officer)
Date:			May 7, 2025			By:			/s/ BRITTANY BAGLEY
									Chief Operating Officer and Chief Financial Officer
									(Principal Financial Officer)