Axon Enterprise 10-Q 2025-09-30

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

For the quarterly period ended September 30, 2025

or

For the transition period from __________to __________

Commission File Number: 001-16391

(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:

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.

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 October 31, 2025 was 78,910,466.

AXON ENTERPRISE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2025

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

PART I - FINANCIAL INFORMATION

AXON ENTERPRISE, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

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

AXON ENTERPRISE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

(unaudited)

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The following discussion and analysis of our financial condition as of September 30, 2025, and results of operations for the three and nine months ended September 30, 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. The discussion includes references to non-GAAP financial measures, such as adjusted gross margin, which supplement our GAAP results by providing additional insight into our financial and operational performance. For definitions and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, refer to “Non-GAAP Measures” within this Quarterly Report on Form 10-Q. This discussion also 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. Our financial results are reported in two reportable segments, Connected Devices and Software and Services.

Our revenues for the three months ended September 30, 2025 were $710.6 million, an increase of $166.4 million, or 30.6%, from the three months ended September 30, 2024. We had loss from operations of $2.1 million, compared to income from operations of $24.1 million for the same period in the prior year. Gross margin dollars increased $96.6 million and decreased as a percentage of revenue to 60.1% from 60.8% compared to the three months ended September 30, 2024. Adjusted gross margin decreased to 62.7% for the three months ended September 30, 2025 compared to 63.2% for the same period in the prior year, primarily driven by global tariffs and a higher mix of Platform Solutions revenue, partially offset by Software and Services. Operating expenses increased by $122.8 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net loss of $2.2 million included a $17.9 million tax provision, net realized and unrealized gains of $14.6 million related to our strategic investments, and a net realized and unrealized gain of $8.3 million related to our marketable securities. Net income of $67.0 million for the three months ended September 30, 2024 included a noncash unrealized gain of $44.0 million on our investment in marketable securities.

Our revenues for the nine months ended September 30, 2025 were $2.0 billion, an increase of $475.4 million, or 31.5%, from the nine months ended September 30, 2024. We had loss from operations of $12.0 million, compared to income from operations of $74.3 million for the same period in the prior year. Gross margin dollars increased $301.3 million and increased as a percentage of revenue to 60.4% from 59.4% compared to the nine months ended September 30, 2024. The increase was primarily driven by leverage on stock-based compensation expense and intangibles amortization. Adjusted gross margin remained consistent at 63.2% for the nine months ended September 30, 2025 compared to the same period in the prior year. Operating expenses increased by $387.6 million, reflecting increased headcount to support business growth and stock-based compensation expense. Net income of $121.9 million included net realized and unrealized gains of $180.6 million related to our strategic investments and a $36.7 million tax benefit, partially offset by a net realized and unrealized loss of 46.0 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 $241.9 million for the nine months ended September 30, 2024 included a realized gain of $42.3 million related to our acquisition in Fusus, unrealized gains of $76.2 million related to our strategic investments, and a noncash unrealized gain of $73.6 million on our investment in marketable securities.

Results of Operations

Three Months Ended September 30, 2025 Compared to the Three Months Ended September 30, 2024

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

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

International revenue increased compared to the prior year September 30, 2024 comparative period, primarily driven by increased sales in our EMEA region.

Net Sales

Net sales by product line were as follows (dollars in thousands):

(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 23.6% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The increase of $34.3 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $18.0 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $25.1 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment, virtual reality training, and fleet systems.

Net sales for the Software and Services segment increased 41.1% for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. 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 $88.9 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment decreased to 49.9% from 52.4% for the three months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense and acquired intangibles amortization, was 52.1% for the three months ended September 30, 2025, compared to 54.5% for the three months ended September 30, 2024. The decrease is primarily driven by global tariffs and higher mix of Platform Solutions revenue.

As a percentage of net sales, gross margin for the Software and Services segment increased to 73.8% from 73.5% for the three months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense and acquired intangibles amortization, increased to 76.8% for the three months ended September 30, 2025, compared to 76.3% for the three months ended September 30, 2024. The increase was primarily driven by higher software mix.

Selling, General and Administrative Expenses

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

Stock-based compensation expense increased $19.8 million in comparison to the prior year September 30, 2024 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.

Salaries, benefits and bonus expense increased $17.3 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $5.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.

Other SG&A expenses increased $18.4 million in comparison to the prior year September 30, 2024 comparable period, primarily driven by an increase in professional and consulting expenses of $12.0 million and an increase in travel expenses of $4.0 million.

Research and Development Expenses

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

Stock-based compensation expense increased $22.0 million in comparison to the prior year September 30, 2024 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.

Salaries, benefits and bonus expense increased $19.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Other R&D expenses increased $21.1 million in comparison to the prior year September 30, 2024 comparable period, partially driven by an increase in professional and consulting expenses of $9.2 million.

Interest Income (Loss), Net

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

(1)Interest expense increased in comparison to the prior year September 30, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.

Other Income, Net

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

(1)Reflects the net realized and unrealized gain on marketable securities, during the three months ended September 30, 2025, as discussed within Note 3.

Provision for Income Taxes

The effective tax rate was 113.9%, for the three months ended September 30, 2025, compared to 15.8% for the three months ended September 30, 2024. The increase in tax provision is driven by lower pre-tax book income in the current period, magnifying the impact of permanent and discrete items. The major driver of the increase in rate was the enactment of the OBBBA in the quarter, which resulted in a reduction of our R&D tax credit, partially offset by the net tax benefit related to stock-based compensation.

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

Net Income (Loss)

We recorded net loss of $2.2 million for the three months ended September 30, 2025 compared to net income of $67.0 million for the three months ended September 30, 2024. Net income (loss) per basic share was $(0.03) for the three months ended September 30, 2025 compared to $0.89 for the three months ended September 30, 2024. Net income (loss) per diluted share was $(0.03) for the three months ended September 30, 2025 compared to $0.86 for the three months ended September 30, 2024.

Nine Months Ended September 30, 2025 Compared to the Nine Months Ended September 30, 2024

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

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

International revenue increased compared to the prior year September 30, 2024 comparative period, primarily driven by increased sales in our Americas region.

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):

(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 26.0% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The increase of $99.9 million in TASER is primarily driven by higher TASER 10 handle and cartridge volume. Personal Sensors increased $56.1 million on continued adoption of our newest body camera, AB4, and higher warranty revenue from more devices in the field. The $75.5 million increase in Platform Solutions is primarily driven by higher volume for counter-drone equipment and virtual reality training.

Net sales for the Software and Services segment increased 39.6% for the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. 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 $243.9 million.

Gross Margin

As a percentage of net sales, gross margin for the Connected Devices segment increased to 49.5% from 49.4% for the nine months ended September 30, 2025 and 2024, respectively. The increase was primarily due to lower stock-based compensation expense. Adjusted gross margin for the Connected Devices segment, which excludes stock-based compensation expense, acquired intangibles amortization, inventory step-up amortization related to acquisitions and payroll taxes related to 2024 Employee XSP vesting, was 52.0% for the nine months ended September 30, 2025, compared to 54.0% for the nine months ended September 30, 2024. The decrease is primarily driven by global tariffs and higher mix of Platform Solutions revenue.

As a percentage of net sales, gross margin for the Software and Services segment increased to 74.5% from 73.9% for the nine months ended September 30, 2025 and 2024, respectively. Adjusted gross margin for the Software and Services segment, which excludes stock-based compensation expense, acquired intangibles amortization and payroll taxes related to 2024 Employee XSP vesting, increased to 77.8% for the nine months ended September 30, 2025, compared to 76.3% for the nine months ended September 30, 2024. The increase was primarily driven by higher software mix.

Selling, General and Administrative Expenses

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

Stock-based compensation expense increased $101.6 million in comparison to the prior year September 30, 2024 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.

Salaries, benefits and bonus expense increased $53.1 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Sales and marketing expense increased $14.5 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to increased commissions.

Other SG&A expenses increased $35.1 million in comparison to the prior year September 30, 2024 comparable period, primarily driven by an increase in professional and consulting expenses of $11.0 million and an increase in travel expenses of $10.3 million.

Research and Development Expenses

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

Stock-based compensation expense increased $82.4 million in comparison to the prior year September 30, 2024 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.

Salaries, benefits and bonus expense increased $53.8 million in comparison to the prior year September 30, 2024 comparable period, which was primarily attributable to an increase in headcount and higher wages.

Other R&D expenses increased $47.1 million in comparison to the prior year September 30, 2024 comparable period, partially driven by an increase in professional and consulting expenses of $21.5 million.

Interest Income (Loss), Net

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

(1)Interest expense increased in comparison to the prior year September 30, 2024 comparable period primarily as a result of the issuance of the Senior Notes in March 2025, as discussed further within Note 10.

Other Income, Net

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

(1)Reflects the net realized and unrealized loss on marketable securities during the nine months ended September 30, 2025, as discussed within Note 3.

(2)Reflects the inducement expense associated with the early repurchase of a portion of our 2027 Notes in the first quarter of 2025, as discussed further within Note 10.

Provision for (Benefit from) Income Taxes

The effective tax rate was (43.1)% for the nine months ended September 30, 2025, compared to 18.6% for the nine months ended September 30, 2024. The change is attributable to the net tax benefit related to stock-based compensation and R&D tax credits. These were partially offset by increased unrecognized tax benefits. The overall change in the effective tax rate also reflects the impact of lower pre-tax book income in the current period, which magnifies the relative effect of permanent and discrete item.

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

Net Income

We recorded net income of $121.9 million for the nine months ended September 30, 2025 compared to net income of $241.9 million for the nine months ended September 30, 2024. Net income per basic share was $1.57 for the nine months ended September 30, 2025 compared to $3.20 for the nine months ended September 30, 2024. Net income per diluted share was $1.48 for the nine months ended September 30, 2025 compared to $3.12 for the nine months ended September 30, 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.

• 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, marketable securities, and mark-to-market on our non-qualified deferred compensation liabilities; 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, including the change in fair value of contingent consideration arrangements; inventory step-up amortization related to acquisitions; costs (or subsequent recoveries of prior costs) related to certain legal or regulatory matters we consider outside of our core operating activities; losses incurred as a result of the disposal, abandonment, and impairment of property, equipment and intangible assets; payroll taxes related to 2024 Employee XSP vesting and 2018 CEO Performance Award option exercises; 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, inventory step-up amortization related to acquisitions, and payroll taxes related to 2024 Employee XSP vesting.

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.

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

As a result of the Segment Realignment, we have recast adjusted gross margin for the three and nine months ended September 30, 2024 to conform to the new presentation. Adjusted gross margin reconciles to gross margin as follows (in thousands):

Liquidity and Capital Resources

Summary

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 September 30, 2025, we had $1.4 billion of cash and cash equivalents, an increase of $969.0 million from December 31, 2024. Refer below for further discussions related to the change in cash and cash equivalents. As of September 30, 2025, we had $952.8 million of available-for-sale investments, an increase of $619.6 million from December 31, 2024 primarily as a result of investment activity following the issuance of the Senior Notes in March 2025. 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 September 30, 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 September 30, 2025, we had letters of credit outstanding of approximately $8.9 million under the facility and available borrowing of $291.1 million. Refer to Note 13 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

As of September 30, 2025, we have an aggregate of $1.75 billion of Senior Notes outstanding. As of September 30, 2025, none of our subsidiaries guarantee the Senior Notes. Our non-guarantor subsidiaries accounted for approximately 13% of our total revenue for the nine months ended September 30, 2025, and approximately 9% and 5% of our total consolidated assets and liabilities (excluding the effect of intercompany transactions), respectively, as of September 30, 2025. Refer to Note 10 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

Furthermore, during the nine months ended September 30, 2025, we sold approximately 0.5 million shares of our common stock under our ATM. We generated approximately $366.3 million in aggregate gross proceeds from sales under the ATM. We recorded aggregate net proceeds of $362.1 million in additional paid-in capital after deducting related expenses, including commissions to the sales agent and issuance costs of $4.2 million. Refer to Note 12 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

Subsequent to the quarter ended September 30, 2025, we acquired the remaining outstanding stock of Prepared and we entered into a definitive agreement to acquire Carbyne. Refer to Note 18 in Part I, Item 1 of this Quarterly Report on Form 10-Q for additional details.

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):

Operating activities

Net cash used in operating activities was $5.9 million for the nine months ended September 30, 2025 compared to net cash provided by operating activities of $158.1 million for the nine months ended September 30, 2024. The net operating cash outflow for the nine months ended September 30, 2025 includes net income of $121.9 million, a net add-back of non-cash income statement items of $346.9 million and a $474.7 million net change in operating assets and liabilities.

Primary drivers of the non-cash items include $425.6 million of stock-based compensation expense for employee equity programs, $28.6 million of debt inducement expense related to the induced conversion for our 2027 Notes and $56.2 million of depreciation and amortization, partially offset by $134.6 million in fair value adjustments for net realized and unrealized gains and losses on our strategic investments and marketable securities and $53.7 million for 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 for one of our strategic investments and a liquidation event for a separate strategic investment. The change in deferred income taxes was primarily driven by a reduction and realization of previously unrealized investment gains, partially offset by the deduction of certain previously capitalized R&D costs as a result of OBBBA.

The change in operating assets and liabilities includes $366.1 million of receivables and contract assets primarily driven by increased sales and the timing of invoicing and cash collections, $13.4 million of inventory and accounts payable primarily driven by advanced raw material purchases for Axon Body 4 and TASER 10 CEDs to support future sales, $116.7 million of prepaid expenses and other assets primarily driven by supplier prepayments, receivables for income tax, and commissions as bookings continue to grow, and $21.6 million of deferred revenue.

Investing activities

Net cash used in investing activities was $498.5 million for the nine months ended September 30, 2025 compared to $48.8 million for the nine months ended September 30, 2024. The net investing cash outflow is primarily driven by $2.0 billion of investment purchases, including $1.8 billion for short-term investments and $249.1 million for strategic investments, and $74.5 million for purchases of property and equipment. The cash outflow was partially offset by $1.3 billion of proceeds from calls, maturities and sales of available-for-sale and marketable securities investments and $376.7 million of proceeds from the sale and liquidation of strategic investments. The increase in net cash outflow compared to prior period is primarily driven by greater available-for-sale and strategic investment activity in the current period, partially offset by the decrease in cash paid for business acquisitions.

Financing activities

Net cash provided by financing activities was $1.5 billion for the nine months ended September 30, 2025 compared to cash used in financing activities of $12.6 million for the nine months ended September 30, 2024. The financing cash inflow was partially driven by gross proceeds of $1.8 billion from the Senior Notes issuance and net proceeds of $362.2 million from our ATM equity offering program. The proceeds were partially offset by $407.5 million of principal payments related to the conversions for our 2027 Notes, $26.9 million of transaction costs related to the induced conversion, debt issuance, and revolver modifications, and payments totaling $209.6 million for income and payroll taxes on behalf of employees who net-settled stock awards during the period. The increase in income and payroll tax payments in the period is largely driven by the vesting of Tranche 1 of the 2024 Employee XSP program.

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 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 nine months ended September 30, 2025.

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 September 30, 2025, a hypothetical 100 basis point increase in interest rates across all maturities would result in a $0.7 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 $8.9 million at September 30, 2025. At September 30, 2025, there was no amount outstanding under the line of credit, and the available borrowing under the line of credit was $291.1 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 September 30, 2025 due to a material weakness in our internal control over financial reporting related to revenue recognition 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 Weakness Related to Revenue Recognition

With respect to this material weakness, management, under the oversight of the Audit Committee, continues to execute the remediation plan as disclosed in Part II, Item 9A of our amended 2024 Annual Report on Form 10-K/A, which includes designing and implementing control activities to ensure there is the appropriate periodic assessment of its revenue accounting policies, and that updates to the polices are made to reflect changes in product offerings or terms and conditions of the arrangements with customers; and designing and implementing additional monitoring controls for its existing and new revenue streams. While we have taken steps to implement our remediation plans, the material weakness cannot be considered remediated until the necessary controls have been designed and implemented and the controls have operated for a sufficient period of time and management has concluded, through testing, that the 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 September 30, 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 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.

• 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.

• 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 procurement laws and regulations could cause us to incur costs that could have a material adverse effect on our business, financial position, results of operations and cash flow.

• We are subject to evolving corporate governance and public disclosure regulations and expectations that

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None.

+Management contract or compensatory plan or arrangement

*Filed herewith

**Furnished herewith

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.