2024–2025
The big
picture
Axon is a mission-driven company whose overarching goal is to protect
life. Our vision is a world where bullets are obsolete, where social conflict
is dramatically reduced, and where everyone has access to a fair and
effective justice system.
,
AXON and Axon are trademarks of Axon Enterprise, Inc., some of which are registered in the US and other countries.
For more information, visit www.axon.com/legal. All rights reserved. © 2025 Axon Enterprise, Inc.
A Letter from Axon CEO, Rick Smith
Fellow shareholders,
As I reflect on 2024, I’m reminded why our mission to protect life is both urgent and timeless.
Across the world, headlines remain heavy—marked by conflict, extremism, injustice, and violence that leave lasting
impacts on communities everywhere. It would be easy to accept this as our inevitable future as global attention shifts
toward economics and trade.
Yet, at Axon, we remain grounded in a different belief: that technology, built with humanity at its core, can forge a better
future. We see this not only as our opportunity, but as our responsibility—our north star—guiding us as we boldly go. We
are thinking bigger, challenging the status quo, and building for a future others may not yet imagine.
In 2024, we began to show what that world can look like—at scale.
A New Era in Public Safety Technology
Our vision of a world where bullets are obsolete, where communities are safer, and where the tools of empathy,
transparency, and accountability take precedence over force is not a utopia but a possible reality. A new era in public safety
is here—powered by artificial intelligence, real-time data, and expanded human reach.
TASER has evolved from a device into a platform—the global standard in de-escalation—gaining adoption and redefining
what’s possible in the field. Now, inextricably linked with our VR training tools, this platform delivers a safer, more
effective alternative to lethal force than ever before.
We continue to invest in this platform, focused on improving performance and ability to achieve a successful connection.
Alongside a suite of AI-powered adaptive training solutions designed to prepare officers for the most dynamic and high-
pressure scenarios, TASER and Axon VR training technology is changing the game.
Our cameras and sensors are now real-time intelligence tools—streaming live video, enabling two-way communication,
and automating evidence workflows. Paired with Fusus, these devices plug into an expansive ecosystem of sensor data that
enhances response times and decision-making. Adoption continues to accelerate—not only across law enforcement, but
also in enterprise and commercial safety applications.
Axon is further harnessing the reach of this vast ecosystem of sensors with the power of AI—reducing administrative
workloads, accelerating outcomes, and freeing critical resources. Draft One is now the fastest-adopted software solution in
Axon history, and we’re just getting started.
What comes next will drive us even further. We’ve introduced the AI Era Plan, a suite of tools we will release over the
coming year to help agencies act faster, more effectively, and with greater precision. We are turning our body-worn
cameras into intelligent virtual assistants—freeing officers from the administrative burdens that distract from their mission
to protect and serve, and our roadmap continues to grow.
Further, robotics and drones are extending officers’ eyes and ears—providing critical context from a safe distance before
action is taken. With our acquisition of Dedrone and partnership with Skydio, our Drone as First Responder solution
further enhances real-time operational efficiency and brings this once-futuristic technology to life. By sending a drone to
the scene of a call before an officer arrives, we are enhancing safety, accelerating response, and giving agencies more
options in critical moments.
Together, these tools are becoming mission critical at times that matter most. They signal a powerful shift from reactive
tactics to proactive intelligence in the field. We are no longer just equipping first responders—we are advancing how they
operate.
Results That Reflect Our Mission
Axon’s momentum isn’t just about innovation—it’s backed by strong execution. In 2024, we achieved record revenue of
$2.1 billion, our third consecutive year of 30%+ revenue growth.
Our subscription-based model is deepening long-term visibility, strengthening our financial foundation, and fueling
continued reinvestment in the business. We delivered net income of $377 million (18.1% margin) and Adjusted EBITDA
of $521 million (25.0% margin). Our 2024 revenue and margin performance reflect achievement of previously stated
targets one full year ahead of our goal.
Looking ahead, we remain committed to delivering durable, profitable growth with a growing opportunity set ahead of us
that is represented by a $129 billion total addressable market.
What’s Next
I believe this is just the beginning of the story we will write at Axon. Our vision extends far beyond the verticals and
solutions we serve today. Public safety is undergoing a generational shift—Axon is leading the way.
We are investing more this year than ever before—and we’ll invest even more in the years ahead. Our team is growing, our
global profile is stronger than ever, and we remain focused on deep alignment with our customers. It is our mission and
theirs: to protect life.
To our employees, customers, and shareholders, thank you—for believing in our mission, for pushing us to innovate, and
for holding us accountable to delivering real impact.
We’re not just building a business. We’re solving problems that matter.
Let’s keep moving forward, together.
The best is yet to come.
-Rick
BUSINESS HIGHLIGHTS
Axon Enterprise, Inc. (“Axon,” the “Company,” “we” or “us”) is a technology leader in global public safety. In 2022, we
announced our moonshot goal 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 supports 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.
Key Performance Highlights(1)
•
Annual revenue surpassed $2 billion to mark our third consecutive year of 30%+ annual growth; reached annual
revenue goal one year ahead of target
•
Annual net income of $377 million supported Adjusted EBITDA of $521 million
•
Acquired Fusus and Dedrone to support our customers' desire for integrated product platforms
•
Surpassed 1 million software users of our digital evidence management system.
Revenue
Total company revenue of $2.1 billion in 2024 achieved through compound annual revenue growth of 34% from 2021.
T O T A L R E V E N U E
( $ M I L L I O N S )
$866
$1,187
$1,561
$2,083
2021
2022
2023
2024
N E T I N C O M E ( L O S S )
( $ M I L L I O N S )
($56)
$147
$176
$377
2021
2022
2023
2024
N E T I N C O M E ( L O S S )
M A R G I N
(6.5)%
12.4%
11.3%
18.1%
2021
2022
2023
2024
Profitability Measures
Adjusted EBITDA margin of 25% reached previously communicated target one year ahead of plan; over 500 basis points
of expansion over 2 years.
O P E R A T I N G C A S H F L O W
( $ M I L L I O N S )
$124
$235
$189
$408
2021
2022
2023
2024
A D J U S T E D E B I T D A
( $ M I L L I O N S )
$183
$232
$331
$521
2021
2022
2023
2024
A D J U S T E D E B I T D A M A R G I N
21.2%
19.5%
21.2%
25.0%
2021
2022
2023
2024
Total Shareholder Returns(2)(3)
AXON ranks above the 95th percentile among all S&P 500 companies for shareholder one-, three-, five- and 10-year
returns.
1 - Y E A R S H A R E
P R I C E
P E R F O R M A N C E
23%
29%
130%
S&P 500
Peer
Group
Axon
3 - Y E A R S H A R E
P R I C E
P E R F O R M A N C E
23%
38%
279%
S&P 500
Peer
Group
Axon
5 - Y E A R S H A R E
P R I C E
P E R F O R M A N C E
82%
171%
711%
S&P 500
Peer
Group
Axon
1 0 - Y E A R
S H A R E
P R I C E
P E R F O R M A N C E
186%
933%
2144%
S&P 500
Peer
Group
Axon
(1)
Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures; see “Reconciliation to Non-GAAP
Measures” for definitions of non-GAAP financial measures and a reconciliation of such measures to the most directly
comparable GAAP measures.
(2)
Represents stock price performance through December 31, 2024.
(3)
See “Executive Compensation—Compensation Discussion and Analysis— Peer Comparator Group” for compensation peer
group.
CORPORATE GOVERNANCE HIGHLIGHTS
Board
Governance Oversight
Shareholder Rights & Engagement
•
Independent board leadership
•
Majority independent board
•
Directors with a wide range of
expertise and multi-faceted
backgrounds
•
Regular board refreshment—three
new directors added since 2023
•
Average director age: 58
•
Average director tenure: 10 years
•
One share, one vote equity structure
•
Annual director elections
•
Majority vote standard
•
Public board service limits
•
Director tenure and term limits
•
Ability for shareholders to call a
special meeting
•
Ability for shareholders to act by
written consent
•
Regular shareholder engagement
with our investors to understand
their views and seek feedback
•
“Proxy access” bylaw provision
Governance Structures Unique to Axon’s Business
Standing Board Committees
Advisory Boards
•
Audit Committee
•
Compensation Committee
•
Nominating and Corporate Governance Committee,
including oversight of Environmental, Social and
Governance (“ESG”) and sustainability-related risks
•
Enterprise Risk and Compliance Committee, including
oversight of cybersecurity risk in consultation with our
Audit Committee
•
Mergers and Acquisitions and Capital Structure
Committee
•
Ethics & Equity Advisory Council (“EEAC”)
composed of community leaders and community-
focused academics, provides our Board with insight
into the responsible development and deployment of
new technology — including artificial intelligence —
in both public safety and community contexts. The
EEAC assists with gap analyses and helps us develop
toolkits, training, and product review processes to
support ethical product design
•
Scientific and Medical Advisory Board composed of
experts from several fields who help to ensure our
Board is aware of evolving technology, practices and
regulations material to our TASER devices so that the
Board can appropriately oversee Axon’s strategy
AXON ENTERPRISE, INC.
17800 North 85th Street
Scottsdale, Arizona 85255
_____________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 29, 2025
_____________________________________________________
To our Shareholders:
The 2025 Annual Meeting of Shareholders (the “Annual Meeting”) of Axon Enterprise, Inc. (the “Company” or “Axon”)
will be held at 1:00 p.m. Pacific time on Thursday, May 29, 2025. The Annual Meeting will be a completely virtual
meeting of shareholders. You will be able to attend the Annual Meeting, vote your shares electronically, and submit your
questions during the live webcast by visiting www.virtualshareholdermeeting.com/AXON2025. You will need to have
your 16-digit control number included on your Notice of Internet Availability of Proxy Materials, on your proxy card, or on
your voting instruction card or form or other instructions that accompanied your proxy statement. The Annual Meeting will
be held for the following purposes:
1.
Election of the directors of the Company named in the proxy statement;
2.
Advisory vote to approve the compensation of the Company’s named executive officers; and
3.
Ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm for fiscal year 2025.
Only shareholders of record of the Company’s common stock at the close of business on March 31, 2025 are entitled to
notice of, and to vote at, the Annual Meeting or any postponement or adjournment thereof. Only shareholders with a valid
16-digit control number will be able to attend the Annual Meeting and vote, ask questions, and access the list of
shareholders as of the close of business on the record date for the Annual Meeting.
Your vote is very important. Whether or not you plan to attend the Annual Meeting, we encourage you to read the
proxy statement and vote as soon as possible. For specific instructions on how to vote your shares, please refer to the
section entitled “General Information About the Annual Meeting and Voting” in the proxy statement and the
instructions on your proxy card or the voting instruction card or form you receive from your broker, bank or other
intermediary. Please note that, if you hold shares in different accounts, it is important that you vote the shares
represented by each account.
If you have any questions concerning the proxy statement or the proposals, would like additional copies of the proxy
statement or need help voting your shares of Axon, please contact Axon’s proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue
New York, NY 10022
Shareholders Call Toll Free: (877) 750-8129
International Callers: +1 (412) 232-3651
Brokers and Banks Call: (212) 750-5833
By Order of the Board of Directors,
/s/ ISAIAH FIELDS
Isaiah Fields
Corporate Secretary
Scottsdale, Arizona
April 16, 2025
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU EXPECT TO ATTEND THE ANNUAL MEETING,
PLEASE VOTE ON THE INTERNET, BY TELEPHONE, OR MARK, SIGN, DATE AND PROMPTLY RETURN
YOUR PROXY OR VOTING INSTRUCTION CARD OR FORM IN THE ENCLOSED ENVELOPE.
TABLE OF CONTENTS
General Information About the Annual Meeting and Voting
1
Governance
5
The Board of Directors
6
Board and Committee Governance
17
Director Compensation
23
Certain Relationships and Related Party Transactions
26
Share Ownership
27
Ownership of Equity Securities of the Company
27
Executive Compensation
29
Executive Officers
29
Compensation Discussion and Analysis
31
Summary Compensation Table
43
Grants of Plan-Based Awards
45
Outstanding Equity Awards at Year-End
45
Option Exercises and Stock Vested
47
Nonqualified Deferred Compensation
48
Potential Payments upon Termination or Change of Control
49
Pay versus Performance
51
Pay Ratio of CEO Compensation to Median Employee Compensation
59
Audit Matters
60
Report of the Audit Committee
60
Proposals
62
Proposal No. 1 – Election of Directors
63
Proposal No. 2 – Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers
64
Proposal No. 3 – Ratification of Appointment of Independent Registered Public Accounting Firm
66
Other Matters
68
Reconciliation of Non-GAAP Measures
70
AXON ENTERPRISE, INC.
17800 North 85th Street
Scottsdale, Arizona 85255
_________________________________________________________
PROXY STATEMENT FOR 2025 ANNUAL MEETING OF SHAREHOLDERS
_________________________________________________________
GENERAL INFORMATION ABOUT THE ANNUAL MEETING AND VOTING
Why am I receiving these proxy materials?
The Board of Directors (the “Board” or “Board of Directors”) of Axon Enterprise, Inc. (the “Company” or “Axon”) has
made these proxy materials available to you on the Internet or has delivered printed copies of these proxy materials to you
by mail in connection with the Board of Directors’ solicitation of proxies for use at the 2025 Annual Meeting of
Shareholders (the “Annual Meeting”), which will take place virtually at 1:00 p.m. Pacific time on Thursday, May 29, 2025.
You will be able to attend the Annual Meeting, vote your shares electronically, access the list of shareholders as of the
close of business on March 31, 2025 (the “Record Date”), and submit your questions during the live webcast by visiting
www.virtualshareholdermeeting.com/AXON2025. You will need to have your 16-digit control number included on your
Notice of Internet Availability of Proxy Materials (the “Notice”), on your proxy card, or on your voting instruction card or
form or other instructions that accompanied your proxy statement (“Voting Instruction Card”). We recommend logging
into the Annual Meeting prior to the start time. This proxy statement describes the matters on which you, as a shareholder,
are entitled to vote. It also gives you information on these matters so that you can make an informed decision. This proxy
statement is first being made available or sent to shareholders on or about April 16, 2025.
What is included in these materials?
These materials include:
¨
This proxy statement for the Annual Meeting; and
¨
The Company’s Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Annual
Report”).
If you received printed copies of the proxy materials by mail, the proxy materials also include the proxy card or Voting
Instruction Card for the Annual Meeting.
Why did I receive a one-page notice in the mail regarding the Internet availability of these proxy materials instead of a
printed copy of these proxy materials?
In accordance with the rules of the Securities and Exchange Commission (“SEC”), instead of mailing printed copies of the
proxy materials to all of our shareholders, we have elected to furnish such materials to shareholders by providing access to
these documents over the Internet. Accordingly, on April 16, 2025, we sent the Notice to shareholders of record and
beneficial owners of shares of our common stock as of the Record Date. Shareholders have the ability to access the proxy
materials on a website referred to in the Notice or request to receive a printed or electronic copy of the proxy materials by
following the directions found in the Notice. The Company encourages you to take advantage of the availability of the
proxy materials on the Internet in order to help reduce the cost and environmental impact of the Annual Meeting.
Axon Enterprise, Inc. | 2025 Proxy Statement | 1
How can I get electronic access to the proxy materials?
The Notice provides you with instructions regarding how to: (1) view our proxy materials for the Annual Meeting on the
Internet; (2) vote your shares after you have viewed our proxy materials; (3) request a printed or electronic copy of the
proxy materials; and (4) instruct us to send our future proxy materials to you electronically via email. Copies of the proxy
materials are also available for viewing on the investor relations page of the Company’s website at http://
investor.axon.com.
What proposals will be voted on at the Annual Meeting and how does the Board of Directors recommend I vote?
Shareholders will vote on the following items at the Annual Meeting:
Proposal
Description
Board Recommendation
No. 1
Election of the directors of the Company named in this proxy statement
FOR
(all nominees)
No. 2
Advisory vote to approve the compensation of the Company’s named
executive officers
FOR
No. 3
Ratification of the appointment of PricewaterhouseCoopers LLP as the
Company’s independent registered public accounting firm for fiscal year
2025
FOR
Shareholders will also vote on the transaction of any other business as may properly come before the Annual Meeting or
any postponement or adjournment thereof. To the maximum extent allowed by the SEC’s proxy rules, the proxy holders
will vote your shares on such other matters as they determine in their discretion.
Where are the Company’s principal executive offices located and what is the Company’s main telephone number?
The Company’s principal executive offices are located at 17800 North 85th Street, Scottsdale, Arizona 85255. The
Company’s main telephone number is (480) 991-0797.
Who may vote at the Annual Meeting?
As of the Record Date, there were 77,848,148 shares of the Company’s common stock outstanding. Each share of common
stock entitles the holder to one vote on each matter that may properly come before the Annual Meeting or any
postponement or adjournment thereof. The holders of a majority of the voting power of all shares entitled to vote, present
in person (virtually) or represented by proxy, will constitute a quorum for the transaction of business at the Annual
Meeting. Shareholders are not entitled to cumulative voting in the election of directors. Only shareholders as of the close of
business on the Record Date are entitled to receive notice of, to attend, and to vote at the Annual Meeting.
What is the difference between a shareholder of record and a beneficial owner of shares held in street name?
Shareholder of Record
If your shares are registered directly in your name with the Company’s transfer agent, Broadridge Corporate Issuer
Solutions, Inc., you are considered the shareholder of record with respect to those shares, and the Notice or printed copies
of the proxy materials were sent directly to you by the Company. If you request printed copies of the proxy materials by
mail, you will also receive a printed proxy card.
Beneficial Owner of Shares Held in Street Name
If your shares are held in an account at a broker, bank or other intermediary, then you are the beneficial owner of shares
held in “street name,” and the Notice or printed copies of the proxy materials were forwarded to you by that organization.
The organization holding your account is considered the shareholder of record for purposes of voting at the Annual
Meeting. As a beneficial owner, you have the right to direct that organization how to vote the shares held in your account.
If you request printed copies of the proxy materials by mail, you will also receive a printed Voting Instruction Card.
Axon Enterprise, Inc. | 2025 Proxy Statement | 2
If I am a shareholder of record of the Company’s shares, how do I vote?
There are multiple ways to vote:
: Via the Internet. If you received a Notice, you may vote via the Internet:
Before the Meeting: until 11:59 p.m. Eastern time on May 28, 2025, visit www.proxyvote.com and enter
the control number found in the Notice.
During the Meeting: visit www.virtualshareholdermeeting.com/AXON2025 and enter the control
number found in the Notice.
( By telephone. If you received or requested printed copies of the proxy materials by mail, until 11:59 p.m.
Eastern time on May 28, 2025, you may vote by calling the toll-free number found on the proxy card.
, By mail. If you received or requested printed copies of the proxy materials by mail, you may vote by
filling out the proxy card and returning it in the envelope provided.
If I am a beneficial owner of shares held in street name, how do I vote?
Your broker or bank will send you instructions on how to vote. There are multiple ways to vote:
: Via the Internet. If you received a Notice, you may vote via the Internet:
Before the Meeting: until 11:59 p.m. Eastern time on May 28, 2025, visit www.proxyvote.com and enter
the control number found in the Notice.
During the Meeting: visit www.virtualshareholdermeeting.com/AXON2025 and enter the control number
found in the Notice.
( By telephone. If you received or requested printed copies of the proxy materials by mail, until 11:59 p.m.
Eastern time on May 28, 2025, you may vote by calling the toll-free number found on the Voting Instruction Card.
, By mail. If you received or requested printed copies of the proxy materials by mail, you may vote by
filling out the Voting Instruction Card and returning it in the envelope provided.
To attend and participate in the Annual Meeting, you will need the 16-digit control number included on your Notice, on
your proxy card or on your Voting Instruction Card. If your shares are held in street name, you should contact your broker
or bank to obtain your 16-digit control number or otherwise vote through your broker or bank. Only shareholders with a
valid 16-digit control number will be able to attend the Annual Meeting and vote, ask questions and access the list of
shareholders as of the close of business on the Record Date for the Annual Meeting.
What constitutes a quorum in order to hold and transact business at the Annual Meeting?
Under Delaware law and the Company’s Bylaws (as amended and restated, the “Bylaws”), the holders of a majority of the
voting power of all shares entitled to vote, present in person or represented by proxy, at a meeting constitutes a quorum.
Abstentions and broker non-votes will be counted as present to determine whether a quorum has been established. Once a
share of the Company’s common stock is represented for any purpose at a meeting, it is deemed present for quorum
purposes for the remainder of the meeting and any adjournment thereof. If a quorum is not present, the Annual Meeting
may be postponed or adjourned until a quorum is obtained.
How are proxies voted?
All valid proxies received prior to the Annual Meeting will be voted. All shares represented by a proxy will be voted and,
where a shareholder specifies by means of the proxy a choice with respect to any matter to be acted upon, the shares will be
voted in accordance with the shareholder’s instructions.
Axon Enterprise, Inc. | 2025 Proxy Statement | 3
What happens if I do not give specific voting instructions?
Shareholder of Record
If you are a shareholder of record and you indicate when voting on the Internet or by telephone that you wish to vote as
recommended by the Board, or sign and return a proxy card without giving specific voting instructions, then the proxy
holders will vote your shares in the manner recommended by the Board on all matters presented in this proxy statement and
as the proxy holders may determine in their discretion with respect to any other matters properly presented for a vote at the
Annual Meeting.
Beneficial Owner of Shares Held in Street Name
If you are a beneficial owner of shares held in street name and do not provide the organization that holds your shares with
specific voting instructions, the organization that holds your shares may vote on routine matters but cannot vote on non-
routine matters. If the organization that holds your shares does not receive instructions from you on how to vote your
shares on a non-routine matter, the organization that holds your shares will inform the inspector of election that it does not
have the authority to vote on such matters with respect to your shares. This is generally referred to as a “broker non-vote.”
Which ballot measures are considered “routine” or “non-routine”?
Proposals No. 1 and No. 2 (election of the directors, and the advisory vote to approve the compensation of the Company’s
named executive officers) are considered “non-routine.” A broker or other nominee cannot vote without specific voting
instructions from the beneficial owner on non-routine matters, and therefore we anticipate there will be broker non-votes in
connection with Proposals No. 1 and No. 2.
Proposal No. 3 (ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered
public accounting firm for fiscal year 2025) is considered “routine.” A broker or other nominee may generally vote on
routine matters, and therefore no broker non-votes are expected in connection with this proposal.
Can I change my vote after I have voted?
You may revoke your proxy and change your vote at any time before the final vote during the Annual Meeting, subject to
the instructions provided on your Notice, on your proxy card or on your Voting Instruction Card, by voting again via the
Internet or by telephone (only your latest Internet or telephone proxy submitted prior to the final vote during the Annual
Meeting will be counted), by signing and returning a new proxy card or Voting Instruction Card with a later date that is
received prior to the Annual Meeting, or by attending the Annual Meeting and voting during the meeting. However, your
attendance at the Annual Meeting will not automatically revoke your proxy unless you vote again during the Annual
Meeting or specifically request that your prior proxy be revoked by delivering to the Company’s Corporate Secretary at
17800 North 85th Street, Scottsdale, Arizona 85255 a written notice of revocation and is received prior to the Annual
Meeting.
Is my vote confidential?
Proxy instructions, ballots and voting tabulations that identify individual shareholders are handled in a manner that protects
your voting privacy. Your vote will not be disclosed either within the Company or to third parties, except as necessary to
meet applicable legal requirements, to allow for the tabulation and certification of votes, and to facilitate a successful proxy
solicitation.
What is the voting requirement to approve each of the proposals?
Election of Directors
For Proposal No. 1, under our Bylaws, assuming the existence of a quorum at the Annual Meeting, each director will be
elected by the affirmative vote of a majority of the votes properly cast for and against such nominee’s election. Abstentions
and broker non-votes will have no impact on the outcome of this proposal if a quorum is present.
Axon Enterprise, Inc. | 2025 Proxy Statement | 4
Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers
For Proposal No. 2, assuming the existence of a quorum at the Annual Meeting, the affirmative vote of a majority of the
total votes properly cast for or against the proposal in person or by proxy at the Annual Meeting is required for approval,
on an advisory basis. Abstentions and broker non-votes will have no impact on the outcome of this proposal if a quorum is
present.
Ratification of Independent Registered Public Accounting Firm
For Proposal No. 3, assuming the existence of a quorum at the Annual Meeting, the affirmative vote of a majority of the
total votes properly cast for or against the proposal in person or by proxy at the Annual Meeting is required for ratification.
Abstentions will have no impact on the outcome of this proposal if a quorum is present.
Who will serve as the inspector of election?
A member of the Company’s internal legal department will serve as the inspector of election.
Where can I find the voting results of the Annual Meeting?
The final voting results will be tallied by the inspector of election and, within four business days after the Annual Meeting,
the Company expects to report the final results on Form 8-K filed with the SEC.
Who is paying for the cost of this proxy solicitation?
The Company will bear the cost of solicitation of proxies for the Annual Meeting. We are soliciting your proxy on behalf
of our Board. In addition to the use of mail, proxies may be solicited by personal interview, telephone, facsimile,
electronically, including email, or otherwise, by our directors, officers and other employees. They will not receive any
additional compensation for these activities. We have engaged Innisfree M&A Incorporated to assist in the solicitation of
proxies for an estimated fee of $15,000 with the option for additional fees up to $20,000 for services not yet contracted,
plus reimbursement of reasonable expenses, and we have agreed to indemnify Innisfree M&A Incorporated against certain
losses, costs and expenses. We also will request persons, firms and corporations holding shares in their names, or in the
names of their nominees, that are beneficially owned by others to send or cause to be sent proxy materials to, and obtain
proxies from, such beneficial owners and will reimburse such holders for their reasonable expenses in doing so.
Who can help answer my other questions?
If after reading this proxy statement you have more questions about the Annual Meeting or the proposals, you should
contact Innisfree M&A incorporated, our proxy solicitor, at:
Innisfree M&A Incorporated
501 Madison Avenue
New York, NY 10022
Shareholders Call Toll Free: (877) 750-8129
International Callers: +1 (412) 232-3651
Brokers and Banks Call: (212) 750-5833
Axon Enterprise, Inc. | 2025 Proxy Statement | 5
GOVERNANCE
THE BOARD OF DIRECTORS
Role of the Board of Directors
The principal duties of the Board of Directors are to oversee management and evaluate strategy. The fundamental
responsibility of the directors is to exercise their business judgment to act in what they reasonably believe to be the best
interest of the Company and its shareholders. Our governance structures are designed to foster disciplined actions, effective
decision-making and appropriate oversight of both performance and compliance.
Axon’s key governance documents, including our Corporate Governance Guidelines, are available at https://
investor.axon.com/Governance-Documents.
Director Nominations
Our Nominating and Corporate Governance Committee (the “NCG Committee”) is responsible for identifying and
evaluating nominees for the position of director and for recommending to the Board a slate of nominees for election at each
annual meeting of shareholders. Nominees may be suggested by directors, members of management, shareholders or, in
some cases, by a third-party firm engaged by the NCG Committee.
Shareholders who wish the NCG Committee to consider their recommendations for nominees for the position of director
should submit their recommendations in writing by mail to the NCG Committee, c/o Axon Enterprise, Inc., 17800 North
85th Street, Scottsdale, AZ 85255, in accordance with the procedures in our Bylaws. Recommendations by shareholders
that are made in accordance with these procedures will receive the same consideration by the NCG Committee as other
suggested nominees.
Qualifications for All Directors
In its assessment of each potential director nominee, including those recommended by shareholders, the NCG Committee
considers the potential nominee’s demonstrated character, judgment, relevant functional and industry experience, and
whether they possess a high degree of business, financial, governmental, military and/or law enforcement, technological,
cybersecurity, risk oversight, corporate governance or human capital management acumen, independence, and other such
factors the NCG Committee determines are pertinent in light of the current needs of the Board. The NCG Committee also
takes into account the ability of a potential director nominee to devote the time and effort necessary to fulfill his or her
responsibilities to the Board of Directors. The NCG Committee engages in regular succession planning for the Board and
key leadership roles on the Board. As part of this succession planning process, the NCG Committee considers the
experiential diversity and tenure of the current directors and the mix of backgrounds on the Board. While the NCG
Committee does not have a formal diversity policy, the Board believes that the Company benefits from a well-rounded
balance of varying qualifications, attributes, skills and experience in the composition of the Board.
The NCG Committee’s process for identifying and evaluating potential director nominees typically involves a series of
internal discussions, review of information concerning candidates and interviews with selected candidates. From time to
time, the Company has paid third-party firms to identify or assist in identifying or evaluating potential nominees.
Majority Voting Standard and Resignation Policy
Our Bylaws provide that we use a majority voting standard instead of a plurality voting standard in uncontested elections.
Under this standard, an uncontested director must receive a majority of the votes properly cast for and against such
nominee and, if they do not, they must tender their resignation for Board consideration. For contested elections where the
number of director nominees exceeds the number of Board seats open for election, each person nominated to be elected as
a director is elected by a plurality of the votes properly cast.
If an incumbent director receives less than a majority of the votes cast with respect to such director’s election in an
uncontested election, such director will promptly tender his or her resignation to the NCG Committee. No later than 90
days following the receipt of any such tendered resignation, (i) the Board will, taking into account any recommendation by
the NCG Committee, take formal action with respect thereto (which action may include accepting or rejecting such
tendered resignation, or taking other action considered appropriate) and (ii) the Company will publicly disclose the Board’s
Axon Enterprise, Inc. | 2025 Proxy Statement | 6
decision and, in the event that the Board of Directors does not accept any such tendered resignation, the rationale for such
decision. The director who tenders his or her resignation will not participate in the recommendation of the NCG Committee
or the decision of the Board with respect to his or her resignation. The NCG Committee, in making any recommendation,
and the Board, in making any decision, may consider any factors or other information they consider appropriate or relevant.
If the Board accepts a tendered resignation, then the Board may fill the resulting vacancy or may decrease the size of the
Board.
Board Governance Enhancements Over the Last Year
Our Board strives to continually enhance our governance structures and adopt industry and market best practices.
Engagement with our shareholders and feedback from those conversations help to inform the Board’s decision-making in
implementing policies, practices and governance structures in line with investor expectations and those that enable
effective risk oversight at the Board level. Consistent with this approach, the Board has implemented the following policies
and Bylaw amendments since our 2024 Annual Meeting of Shareholders (the “2024 Annual Meeting”), including:
•
establishing a Human Rights Policy that extends to our employees, officers, directors, partners, vendors and
suppliers worldwide and is based on our goal of upholding the highest standards; and
•
refreshing our Board’s tenure and term limits
Human Rights Policy
The Board formalized our Human Rights Policy to align with international standards, including the United Nations Guiding
Principles on Business and Human Rights. The policy reinforces Axon’s commitment to fair labor practices, non-
discrimination and ethical supply chain standards, including the prohibition of forced labor, human trafficking and child
labor. It also affirms the Company’s support for equal employment opportunities, freedom of association, and a diverse and
inclusive workplace. To strengthen compliance, Axon has established clear reporting mechanisms to address human rights
concerns and ensure accountability across our operations and supply chain. This policy reflects Axon’s dedication to
responsible business conduct and our mission to protect life with integrity and respect for human dignity.
Board Refreshment; Tenure and Term Limits
The Board values the contributions of both newer perspectives as well as directors who have developed, over a period of
time, an increased understanding of, and insight into, the governance and business of the Company and the issues
confronting it. To further our commitment to ensuring meaningful Board refreshment, the Company’s Corporate
Governance Guidelines implement a formal term limit (as defined below) for directors in order to ensure alignment of
director qualifications, attributes, skills and experience with the Company’s evolving strategy. Each non-executive director
of the Company must submit a letter of resignation to the Chair of the NCG Committee upon reaching 20 continuous years
of service as a director of the Company or age 75 (the “term limit”), whichever occurs first, and each year thereafter, which
letter of resignation may be accepted or rejected by the Board in its sole discretion. Prior to August 2024, the term limit
was the earlier of 20 continuous years of service as a director of the Company or age 72 (the “prior term limit”).
Pursuant to the prior term limit, Mr. Garnreiter provided his letter of resignation to the Chair of the NCG Committee. After
considering Mr. Garnreiter’s leadership roles as Chair of the Board and Audit Committee Chair, particularly in light of the
Company’s recent transition in independent registered public accounting firms, the NCG Committee recommended to the
Board that it decline Mr. Garnreiter’s offer to resign to provide additional time to plan for his succession. On March 4,
2024, the Board determined to follow the NCG Committee’s recommendation, declined Mr. Garnreiter’s offer to resign,
and appointed Mr. Graham Smith as Audit Committee Chair to provide for a smooth future transition. Pursuant to the
revised term limits, Mr. Garnreiter was not required to submit a letter of resignation in 2025.
Other Governance Features
Our Board has previously adopted other policies, practices and governance structures that we believe are in line with
investor expectations, aligned with industry and market best practices and enable effective risk oversight at the Board level.
Axon Enterprise, Inc. | 2025 Proxy Statement | 7
Director Commitments and Service on Other Boards
The Board of Directors recognizes the time commitment that service on a board of directors requires, as well as other
commitments applicable to the Company’s directors. The Company’s Corporate Governance Guidelines establish limits on
the number of boards on which our directors may serve. A director who is not a named executive officer of a public
company may serve on a total of four public company boards, including the Company’s Board. A director who is also a
named executive officer of a public company may serve on a total of two public company boards, including the Company’s
Board.
Proxy Access
Our Bylaws include a “proxy access” provision, which permits a shareholder, or a group of up to 20 shareholders, who own
3% or more of our voting stock continuously for at least three years, to nominate and include in our annual meeting proxy
materials director nominees constituting up to the greater of two directors or 20% of the Board, subject to certain
conditions and provided that the shareholder(s) and director nominee(s) satisfy all eligibility, procedural and disclosure
requirements specified in our Bylaws, including that each director nominee submitted through the proxy access provisions
must meet the qualifications to be an independent director.
Exclusive Forum
Our Bylaws provide as an exclusive forum (i) the Delaware Court of Chancery for certain types of actions and claims
(including derivative actions, actions asserting a claim of breach of fiduciary duty and actions against us arising pursuant to
the Delaware General Corporation Law or our organizational documents) and (ii) the federal district courts of the United
States for claims arising under the Securities Act of 1933, as amended (the “Securities Act”), in each case subject to certain
limitations. Our Board believes this provision is in the best interest of Axon and its shareholders. First, designating a forum
in which certain claims can be brought promotes the efficient resolution of such claims and reduces the likelihood of
duplicative lawsuits being brought in multiple jurisdictions. Further, the ability of plaintiffs to litigate claims governed by
Delaware law in courts other than the Delaware Court of Chancery may mean that claims are brought in courts that may
not apply Delaware law in the same manner as the Delaware Court of Chancery. The Delaware Court of Chancery’s
considerable expertise has led to the development of a substantial and influential body of case law interpreting Delaware
corporate law. We expect this will provide us and our shareholders with more consistency and predictability regarding the
outcome of corporate disputes, which can minimize the time, cost and uncertainty of litigation for all parties. Similarly, the
Board believes designating the federal district courts of the United States as the exclusive forum for claims brought under
the Securities Act prevents forum shopping of state courts by plaintiffs and facilitates review of Securities Act claims by
judges in federal courts that may have significant experience and expertise in adjudicating such claims. The exclusive
forum provision in our Bylaws does not apply to suits brought to enforce any liability, obligation or duty created by the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) to the extent such application would be contrary to
law.
Our Highly Qualified Board of Directors
The Board has identified particular qualifications, attributes, skills and experience that it believes are important to be
represented on the Board as a whole in order to advise and contribute to the execution of the Company’s strategic
objectives. Each Board member was selected in accordance with the process for identifying and evaluating director
nominees described above. Accordingly, the Board believes that each of the Company’s Board members brings a myriad of
qualifications, attributes, skills and experience that are a combined benefit to the Company and its shareholders.
While recognizing that any group of people is more than the sum of its parts, that biography does not always define identity
and that attempting to quantify diversity is an imperfect exercise in a world of unique individuals, we also acknowledge
and celebrate that our Board intentionally reflects a wide range of human experiences and identities.
Board Demographics
Our Board represents a range of highly relevant skills and experiences, coupled with diverse educations and backgrounds,
that enhance the Board’s collective perspective and decision-making, while providing for effective oversight of the
Axon Enterprise, Inc. | 2025 Proxy Statement | 8
Company. The demographic information provided below is based on voluntary self-identification by each director
nominee.
Director Nominees
Gender Diversity
Director Nominees
Racial Diversity
Board Skills Matrix
Skills and Experience
Ayers
Brown
Cullivan
Garnreiter
Kalinowski
McBrady
Partovi
G. Smith
P. Smith
Williams
Total
CEO/senior executive experience
•
•
•
•
•
•
•
•
•
•
10
Accounting/auditing experience
•
•
2
Governmental, regulatory and/or legal
experience
•
•
2
Military and/or law enforcement experience
•
1
Technology expertise
•
•
•
•
•
•
•
7
Cybersecurity experience
•
1
Risk oversight and management
•
•
•
•
•
•
•
•
8
Public company board experience/corporate
governance
•
•
•
•
•
5
Human capital management
•
1
Director since
2023
2020
2017
2006
2019
2016
2010
2023
1993
2023
Director Nominees in 2024
Erika Ayers Badan
Director since 2023
Age: 49
Board Committee: NCG Committee
Other Public Companies Boards: None
Ms. Ayers Badan was appointed Chief Executive Officer (“CEO”) of Food52 in April 2024. Ms. Ayers Badan was
previously CEO of Barstool Sports from 2016 through January 2024, during which time it experienced tremendous brand
and business growth as one of the fastest-growing digital innovation, sports, entertainment and lifestyle media brands on
the Internet. Prior to joining Barstool Sports, Ms. Ayers Badan held various executive roles at media platforms such as
Microsoft Corporation, AOL, Leaf Group (formerly Demand Media, Inc.) and Yahoo! Inc. She has extensive experience
in transforming start-up organizations into multi-industry operations. She was also part of two early stage start-ups in the
fashion and music industry and sits on the advisory board of the Premier Lacrosse League. Ms. Ayers Badan previously
served on the board of directors of World Wrestling Entertainment, Inc. from October 2020 to September 2022. Ms.
Ayers Badan holds a B.S. in Sociology and Psychology from Colby College.
Axon Enterprise, Inc. | 2025 Proxy Statement | 9
50% Women
30% Racially
Diverse
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise
Experience as an executive of media platform companies provides Ms.
Ayers with valuable insight into communication expertise, Internet-related
business development demands and brand building.
Risk Oversight & Management; Public
Company Board Experience/Corporate
Governance
Experience as an advisor to multiple companies and as a board member of
World Wrestling Entertainment, Inc. from October 2020 to September
2022 provides insight into public company corporate governance matters.
Adriane Brown
Director since 2020
Age: 66
Board Committees: Compensation Committee, NCG Committee (Chair) and Enterprise Risk and
Compliance Committee
Other Public Company Boards: American Airlines Group Inc., eBay Inc. and KKR & Co Inc.
Ms. Brown has been a Managing Partner at Flying Fish Partners, a technology focused venture capital firm, since 2021
and joined as a Venture Partner in 2018. Prior to that, Ms. Brown served as President and Chief Operating Officer for
Intellectual Ventures (“IV”), an invention and investment company that commercializes inventions, from January 2010
through July 2017, and served as a Senior Advisor until December 2018. Before joining IV, Ms. Brown served as
President and CEO of Honeywell Transportation Systems (“Honeywell”) from January 2005 to June 2009. Over the
course of 10 years at Honeywell, she held leadership positions serving the aerospace and automotive markets globally.
Prior to Honeywell, Ms. Brown spent 19 years at Corning, Inc., ultimately serving as Vice President and General
Manager, Environmental Products Division, having started her career there as a shift supervisor. Ms. Brown serves on the
boards of directors of American Airlines Group Inc., eBay Inc. and KKR & Co Inc. Ms. Brown also serves on the board
of directors of the International Women’s Forum. Previously, she served on the boards of directors of Allergan plc and
Raytheon Company until 2020, respectively, and Harman International Industries until 2017. Ms. Brown holds an
Honorary Doctorate of Humane Letters and a B.A. in environmental health from Old Dominion University and is a
winner of its Distinguished Alumni Award. She also holds a M.A. in Management from the Massachusetts Institute of
Technology where she was a Sloan Fellow.
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise
Ms. Brown is a Managing Partner and member of the Investment
Committee at Flying Fish Partners. The fund invests in and supports start-
ups utilizing artificial intelligence and machine learning to transform
processes in a variety of market verticals. Over the course of her career,
Ms. Brown has engaged in business and technology transformations
across a number of businesses and markets.
Risk Oversight & Management; Public
Company Board Experience/Corporate
Governance
Board experience from Allergan plc, American Airlines Group Inc., eBay
Inc., KKR & Co Inc., Harman International Industries and Raytheon
Company provides extensive insight into public company corporate
governance matters.
Axon Enterprise, Inc. | 2025 Proxy Statement | 10
Julie Cullivan
Director since 2017
Age: 59
Board Committees: Audit Committee, NCG Committee and Enterprise Risk and Compliance
Committee (Chair)
Other Public Company Boards: Astra Space Inc.
Ms. Cullivan has been a Special Advisor at Brighton Park Capital, an entrepreneur inspired growth equity firm since
2020. Prior to that, Ms. Cullivan was the Chief Technology and People Officer at Forescout Technologies, Inc.
(“Forescout”), reporting to the CEO, where she was responsible for leading the company’s business model
transformation, information technology strategy, security risk and compliance program, customer production operations,
and human resources. She joined in July 2017 and helped Forescout scale from a private company with $160 million in
revenue, through its successful initial public offering, to a publicly traded company with revenues of $330 million and a
$1.5 billion valuation. In addition to focusing on scale, Ms. Cullivan led Forescout’s operational transformation from an
appliance and license software business to a cloud subscription business. Forescout was acquired by Advent International,
a private equity firm, in 2020 and Ms. Cullivan left in January 2021. Prior to Forescout, Ms. Cullivan was an Executive
Vice President of Business Operations and Chief Information Officer at FireEye Inc. and a Senior Vice President at
McAfee Corp. Additionally, Ms. Cullivan held executive roles at Autodesk, Inc., EMC Corporation and Oracle
Corporation. Ms. Cullivan has served on the boards of directors of HeartFlow, Inc. since 2020, OPSWAT since 2021 and
Cobalt.io since 2022 and previously served on the boards of Astra Space Inc. (NASDAQ: ASTR), Judy Security, and
SADA Systems. Ms. Cullivan holds a B.S. in Finance from Santa Clara University.
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise;
Cybersecurity Experience; Human Capital
Management
Ms. Cullivan is a special advisor at Brighton Park Capital. The firm
invests in technology, security, and healthcare sectors. Throughout her
career, Ms. Cullivan has lead digital technology transformation strategies
and cybersecurity & compliance programs at multiple enterprise
technology companies including three cybersecurity technology firms. In
her prior role, Ms. Cullivan was Chief Technology and People Officer at
Forescout where she led talent acquisition, total rewards strategy, and
culture.
Risk Oversight & Management; Public
Company Board Experience/Corporate
Governance
Experience as Chief Technology and People Officer at Forescout, and
Executive Vice President of Business Operations and Chief Information
Officer at FireEye Inc., leading cross functional initiatives and
information security strategy in a high-growth environment, provides
experience in risk management.
Michael Garnreiter, Chair
Director since 2006
Age: 73
Board Committees: Audit Committee, Compensation Committee and NCG Committee
Other Public Company Boards: Knight-Swift Transportation Holdings Inc. and Amtech Systems,
Inc.
Mr. Garnreiter most recently served as Vice President of Finance and Treasurer of Shamrock Foods, a privately held
manufacturer and distributor of foods and food-related products. He retired from this position in December 2015. From
January 2010 until August 2012, Mr. Garnreiter was a managing director of Fenix Financial Forensics, a Phoenix-based
litigation and financial consulting firm. From August 2006 through December 2009, Mr. Garnreiter served as managing
member of Rising Sun Restaurant Group, LLC, a private restaurant operating company. From April 2002 through June
2006, Mr. Garnreiter was Executive Vice President, Treasurer and Chief Financial Officer of the Main Street Restaurant
Group. Mr. Garnreiter previously served with the international accounting firm, Arthur Andersen, from 1974 through
March 2002 with increasing levels of responsibility, culminating as a partner. Additionally, Mr. Garnreiter has served on
the board of Knight-Swift Transportation Holdings Inc. since 2003 and has also served on the board of Amtech Systems,
Inc. since 2007. Mr. Garnreiter holds a B.S. in Accounting from California State University at Long Beach and is a
Certified Public Accountant.
Axon Enterprise, Inc. | 2025 Proxy Statement | 11
Specific Qualifications, Attributes, Skills and Experience:
Accounting/Auditing Experience
As a Certified Public Accountant and former partner at Arthur Andersen,
Mr. Garnreiter has served on the audit committee of each board of
directors on which he has served in the past and has extensive knowledge
of SEC rules and regulations.
Risk Oversight & Management; Public
Company Board Experience/Corporate
Governance
Board experience from Knight-Swift Transportation Holdings Inc. and
Amtech Systems, Inc. provides extensive insight into public company
corporate governance matters.
Caitlin Kalinowski
Director since 2019
Age: 44
Board Committees: Audit Committee and Mergers and Acquisitions and Capital Structure
Committee
Other Public Company Boards: None
Ms. Kalinowski is a Member of Technical Staff at OpenAI where she focuses on AI and robotics. Previously, she was the
head of the AR Glasses Hardware team at Meta’s Reality Labs division and, before that, led the VR Hardware team,
where she played a key role in the design and engineering of Oculus’ award-winning VR devices. Before working at
Meta, Ms. Kalinowski was a Product Design Engineer at Apple where she was a technical lead on the Mac Pro and
MacBook Air products and was part of the original unibody MacBook Pro team. Ms. Kalinowski is also on the strategic
board of Lesbians Who Tech & Allies, the largest LGBTQ technical organization in the world. She also advises startups
working with physical products, drawing on over 20 years of experience in high-tech hardware development. Ms.
Kalinowski holds a B.S. in Mechanical Engineering from Stanford University.
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise
Ms. Kalinowski has extensive experience in established technology organizations such
as OpenAI, Meta and Apple. Ms. Kalinowski led technical teams at Apple and Meta
and is currently a Member of Technical Staff at OpenAI focusing on AI and robotics.
She has tremendous insight into product design and engineering for technology focused
initiatives.
Axon Enterprise, Inc. | 2025 Proxy Statement | 12
Matthew McBrady, Ph.D.
Director since 2016
Age: 54
Board Committees: Enterprise Risk and Compliance Committee and Mergers and Acquisitions and
Capital Structure Committee (Chair)
Other Public Company Boards: None
Dr. McBrady is a Professor of Practice in Finance at the Darden Graduate School of Business Administration at the
University of Virginia (the “Darden School”), where he has taught classes in Corporate Financial Strategy, Corporate
Financing, and Impact and ESG Investing since August 2020. Prior to returning to academia, Dr. McBrady spent more
than a decade as a private equity and hedge fund investor, serving as Senior Advisor and co-Chief Investment Officer of
Callaway Capital (from January 2017 to December 2019), Managing Director of Investments at the Cystic Fibrosis
Foundation (from September 2017 to January 2019) and Managing Director and Chief Investment Officer of the Multi-
Strategy Hedge Funds at BlackRock, Inc. (from January 2014 through September 2016). Prior to joining BlackRock, Dr.
McBrady served as Managing Director and Head of Investment Strategy and Risk Management at Silver Creek Capital
Management, LLC (from January 2009 through January 2014), and as a Senior Associate and Vice President in the North
American Private Equity group at Bain Capital, LLC (from January 2007 to January 2009).
Prior to becoming a professional investor, Dr. McBrady served as both a senior economic policy advisor and finance
professor. During his earlier career in academia, Dr. McBrady also served as a Professor of Finance at the Darden School
(from May 2003 through December 2006) as well as the Wharton School of Business at the University of Pennsylvania
(from September 2002 through May 2003). From August 1998 through January 2000, Dr. McBrady served as an
international economist with President Clinton’s Council of Economic Advisers and the U.S. Treasury Department. In
addition to his work in the private sector and academia, Dr. McBrady currently serves as an advisor to a number of impact
investing funds and as a Director and the Chairman of the Investment Committee for Global Partnerships, a non-profit
impact investor that has deployed more than $800 million in concessionary loans to improve the lives of people living at
the bottom of the pyramid in Central and South America and Africa. Dr. McBrady holds a B.A. in Economics from
Harvard University, a M.Sc. in International Economics from Oxford University (U.K.) where he was a Marshall Scholar,
and a Ph.D. in Business Economics from Harvard University. Dr. McBrady previously served as a director for the
Company from January 2001 through June 2014.
Specific Qualifications, Attributes, Skills and Experience:
Governmental Experience
Service as a member of President Clinton’s Council of Economic Advisors
provides deep insight into government processes.
Risk Oversight & Management
Teaching positions at the Harvard Business School, the Wharton School of
Business and the Darden Graduate School of Business Administration provide
valuable financial knowledge and context. Service as Chief Investment Officer
for BlackRock and investment strategy and management positions for other
investment management firms provide experience in risk management.
Axon Enterprise, Inc. | 2025 Proxy Statement | 13
Hadi Partovi
Director since 2010
Age: 52
Board Committees: Compensation Committee (Chair) and Mergers and Acquisitions and Capital
Structure Committee
Other Public Company Boards: None
Mr. Partovi is the CEO and co-founder of the non-profit education organization Code.org and has served as a director on
the board of MNTN, Inc., a private company, since 2023. Mr. Partovi is a past or present strategic advisor or early
investor at numerous technology companies, including Facebook, Dropbox, Uber, Airbnb, SpaceX and Zappos. From
2009 through 2010, Mr. Partovi was Senior Vice President of Technology for MySpace (via acquisition) and, from 2006
through 2009, he was President and co-founder of iLike, Inc., which was acquired by MySpace in 2009. From 2002
through 2005, Mr. Partovi was General Manager, Microsoft MSN Entertainment and MSN.com and, from 1999 through
2001, he was Co-Founder and Vice President of Product and Professional Services for Tellme Networks, Inc. From 1994
through 1999, he was Program Manager for Microsoft Internet Explorer. Mr. Partovi holds a B.A. and a M.S. in
Computer Science, summa cum laude, from Harvard University.
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise
Experience as an executive, entrepreneur, investor and advisor across a variety of
successful technology companies provides Mr. Partovi with invaluable insight
into software and Internet-related business development initiatives.
Risk Oversight & Management
Background as an advisor to multiple start-up companies provides Mr. Partovi
experience in the unique challenges facing companies pursuing new technology.
Graham Smith
Director since 2023
Age: 65
Board Committees: Audit Committee (Chair), Compensation Committee and Mergers and
Acquisitions and Capital Structure Committee
Other Public Company Boards: Procore Technologies, Inc., GoDaddy, Inc.
Mr. Smith has served on the board of directors of Procore Technologies, Inc., a provider of cloud-based construction
management software, since 2020 and on the board of directors of GoDaddy, Inc., a provider of digital domains and
business management software for small business, since 2024. Mr. Smith previously served as chair of the board of
directors of Splunk Inc. from March 2019 through March 2024, and as a member of its board of directors from 2011
through 2024. He also served as the interim CEO of Splunk Inc. from November 2021 to April 2022. Mr. Smith served in
various leadership positions at salesforce.com, inc. (“Salesforce”), a provider of enterprise cloud computing software,
from 2007 to 2015, including as Chief Financial Officer and most recently as Executive Vice President. Prior to joining
Salesforce, Mr. Smith served as Chief Financial Officer at Advent Software Inc., a portfolio accounting software
company, from 2003 to 2007. Mr. Smith previously served on the board of directors of BlackLine, Inc., a provider of
cloud-based solutions for finance and accounting, from 2015 to 2022; Citrix Systems, Inc., an enterprise software
company, from 2015 to 2018; MINDBODY, Inc., a cloud-based wellness services marketplace (acquired by Vista Equity
Partners), from 2015 to 2019; Xero Limited, an online accounting software company, from 2015 to 2020; Slack
Technologies, Inc., a provider of cloud-based professional collaboration tools (acquired by salesforce.com), from 2018 to
2021; and Elliott Opportunity II Corp., a special purchase acquisition company, from June to December 2021. Mr. Smith
holds a B.Sc. from Bristol University in England and qualified as a chartered accountant in England and Wales.
Axon Enterprise, Inc. | 2025 Proxy Statement | 14
Specific Qualifications, Attributes, Skills and Experience:
Accounting/Auditing Experience
As an international chartered accountant, Mr. Smith has served as Chief
Financial Officer of multiple publicly traded companies.
Technology Expertise
Experience as an executive of multiple technology companies, including
leadership positions at Salesforce, provides expertise in technology
company operations.
Risk Oversight & Management; Public
Company Board Experience/Corporate
Governance
Board experience for Splunk Inc. and Procore Technologies, Inc., as well
as BlackLine, Inc., Citrix Systems, Inc., MINDBODY, Inc., Slack
Technologies, Inc. and Xero Limited, provides extensive insights into
public company corporate governance matters.
Patrick Smith, CEO
Director since 1993
Age: 54
Board Committees: None
Other Public Company Boards: None
Mr. Smith has served as CEO and as a director of the Company since 1993. He is also co-founder of the Company. After
graduating from Harvard University, cum laude, in just three years (class of 1991), Mr. Smith entered directly into the
M.B.A. program at the University of Chicago. In two years, he completed both a master’s degree in international finance
from the University of Leuven in Leuven, Belgium and an M.B.A. with honors at the University of Chicago, graduating in
the top 5% of his class. After completing graduate school in the summer of 1993, he co-founded Axon Enterprise, Inc.
(F.K.A. TASER International, Inc.) in September 1993 with his brother, Thomas P. Smith. Among other qualifications,
Mr. Smith is the visionary of the Company and brings to the Board extensive executive leadership experience in the
technology industry, including the management of worldwide operations, sales, service and support as well as technology
innovation as he currently holds 53 U.S. patents.
Specific Qualifications, Attributes, Skills and Experience:
Technology Expertise
Mr. Smith is highly skilled in technology innovation and is the holder of 53 U.S.
patents.
Risk Oversight & Management
Management and board experience as the CEO and co-founder of the Company
provides extensive executive leadership expertise in navigating the range of risks
faced by the Company over the past 30+ years.
Jeri Williams
Director since 2023
Age: 59
Board Committees: Audit Committee and Enterprise Risk and Compliance Committee
Other Public Company Boards: None
Ms. Williams served as Chief of Police for the Phoenix Police Department, the first female to lead the city’s force, from
2016 to 2022. During her tenure with the department, she advanced a number of progressive strategies, including key
areas such as community engagement and professional standards. Previously, she served nearly six years as Chief of
Police in the City of Oxnard, California. Ms. Williams has received extensive accolades for her dedication to law
enforcement, including being named one of Arizona’s Most Intriguing Women by the Arizona Centennial Legacy Project
and recognized as California’s Assembly District 44 Woman of the Year for her leadership and outstanding
accomplishments. In 2016, President Obama appointed Ms. Williams to a membership position on the Medal of Valor
Review Board. She has also served as the first female President of the Major Cities Chiefs Association. Since 2023,
Ms.Williams has acted as Principal for Impresa Strategy, a business consulting and advisory services firm. Ms. Williams
holds a B.A. in Fine Arts from Arizona State University and a M.A. in Education from Northern Arizona University.
Axon Enterprise, Inc. | 2025 Proxy Statement | 15
Specific Qualifications, Attributes, Skills and Experience:
Governmental Experience
Service as the President of the Major Cities Chiefs Association provides valuable
insight into community engagement and enhances relationships with various
governmental agencies and law enforcement leaders.
Law Enforcement Experience
Service as Chief of Police for the Phoenix Police Department and City of Oxnard,
California provides deep insight into the operational demands of our law
enforcement customers.
Axon Enterprise, Inc. | 2025 Proxy Statement | 16
BOARD AND COMMITTEE GOVERNANCE
Board Leadership Structure
Michael Garnreiter, Chair of the Board
Patrick Smith, CEO
The Company’s governance documents provide the Board with flexibility to select the appropriate leadership structure for
the Company. In making leadership structure determinations, the Board considers many factors, including the specific
needs of the business and what is in the best interests of the Company and its shareholders. The current leadership structure
is anchored by an independent director as Chair of the Board. If at any time the Chair of the Board is not independent, the
Board will elect a “Lead Independent Director” by a majority vote of the independent directors. The Lead Independent
Director will have the responsibilities described in our Corporate Governance Guidelines. The Board believes this structure
provides a well-functioning and effective balance between strong Company leadership and appropriate safeguards and
oversight by independent directors.
The principal role of the Chair of the Board is to manage and to provide leadership to the Board of Directors of the
Company. The Chair is accountable to the Board and acts as a direct liaison between the Board and the management of the
Company, through the CEO. The Chair acts as the communicator of Board decisions where appropriate. The separation of
the role of the Chair from that of the CEO is based on the Board’s view that the Chair should be free from any interest and
any business or other relationship that could interfere with the Chair’s judgment, other than interests resulting from
Company shareholdings and remuneration.
The NCG Committee conducts an annual evaluation of the performance of the Board and each of its standing committees
and conducts regular peer assessments of each individual director.
Axon’s key governance documents, including our Corporate Governance Guidelines, are available at https://
investor.axon.com/Governance-Documents.
Meetings of the Board of Directors
During the year ended December 31, 2024, the Board held nine meetings. No member of the Board attended fewer than
75% of the total number of meetings of the Board (held during the period for which he or she was a director) and the total
number of meetings held by all committees of the Board on which such director served (held during the period that such
director served). Directors are encouraged by the Company to attend each annual meeting of shareholders if their schedules
permit. All of our directors attended the 2024 Annual Meeting.
Axon Enterprise, Inc. | 2025 Proxy Statement | 17
Committees of the Board of Directors
The Board currently has five standing committees: the Audit Committee, the Compensation Committee, the NCG
Committee, the Enterprise Risk and Compliance Committee, and the Mergers and Acquisitions and Capital Structure
Committee. The following table summarizes the current membership of our standing non-management Board committees,
and identifies the chair of each committee and the number of committee meetings held in fiscal 2024:
Audit
Committee
Compensation
Committee
NCG
Committee
Enterprise
Risk and
Compliance
Committee
Mergers and
Acquisitions
and Capital
Structure
Committee
# Meetings
7
3
8
4
6
Director
Erika Ayers Badan
X
Adriane Brown
X
*
X
Julie Cullivan
X
X
*
Michael Garnreiter (1)
X
X
X
Caitlin Kalinowski
X
X
Matthew McBrady
X
*
Hadi Partovi
*
X
Graham Smith (2)
*
X
X
Jeri Williams
X
X
X = Member
* = Chair
(1) Michael Garnreiter served as Audit Committee Chair until March 4, 2024. Mr. Garnreiter also serves as Chair of the
Board.
(2) There is no family relationship between Graham Smith and our CEO, Patrick Smith.
Audit Committee
The Audit Committee, established in accordance with Section 3(a)(58)(A) of the Exchange Act, assists the Board in
fulfilling its oversight responsibilities regarding (i) the Company’s process for financial reporting and the integrity of the
Company’s financial statements; (ii) the Company’s internal control system; (iii) the performance of the Company’s
internal audit function; (iv) the independent accountants’ independence, qualifications and performance; (v) the Company’s
risk assessment and management policies for major financial risks; and (vi) the Company’s Code of Business Conduct &
Ethics (“Code of Ethics”) and process for monitoring compliance with laws and regulations. In furtherance of its purpose,
the Audit Committee has the following specific responsibilities:
•
Discusses with management the Company’s major financial risk exposures and the steps management has taken to
monitor and control such exposures;
•
Discusses with management the Company’s liquidity, cash management and treasury functions, and provides
oversight of the Company’s Corporate Investment Policy;
•
Reviews and considers for ratification or approval all related party transactions and/or other transactions
implicating a potential conflict of interest between the Company and any of its directors, executive officers, 5%
shareholders or other related parties if such transactions are in excess of $120,000;
•
Periodically reviews the Company’s program for monitoring compliance with the Code of Ethics and receives and
reviews updates from management regarding the implementation of the Code of Ethics, including the annual
ethics certification and training processes of covered persons;
•
Establishes procedures for (i) the receipt, retention and treatment of complaints received by the Company
regarding internal accounting controls or accounting or auditing matters and (ii) the confidential, anonymous
submission by employees of the Company of concerns regarding internal accounting controls, questionable
accounting or auditing matters;
Axon Enterprise, Inc. | 2025 Proxy Statement | 18
•
Periodically obtains any required reports and assurances from the independent accountants, the internal auditor
and management with respect to the effectiveness of the Company’s system for monitoring compliance with laws
and regulations; and
•
Receives and reviews reports from management with respect to any significant legal, compliance or regulatory
matters that may have a material impact on the Company’s business, financial statements or compliance policies,
including material notices to or inquiries received from governmental agencies.
With respect to any such matters that involve cybersecurity, data privacy or information technology, the Committee
coordinates and consults with the Enterprise Risk and Compliance Committee as appropriate.
The Audit Committee exercises sole authority with respect to the selection of the Company’s independent registered public
accounting firm and the terms of its engagement. The Audit Committee reviews with the independent registered public
accounting firm, upon the completion of its audit of the Company’s financial statements, the results of the auditing
engagement; reviews with the independent registered public accounting firm, upon the completion of its quarterly review
of the Company’s financial statements, the results of the quarterly review; and at least annually meets with the independent
registered public accounting firm to review any recommendations they may have with respect to the Company’s financial,
accounting or auditing systems.
The Report of the Audit Committee for the year ended December 31, 2024 is included in this proxy statement. See “Audit
Matters—Report of the Audit Committee” for more information regarding the Audit Committee.
The Audit Committee’s primary responsibilities are set forth in its charter, which is subject to annual review and revision.
The full text of the Audit Committee charter is available on our website at https://investor.axon.com/Governance-
Documents.
Compensation Committee
The Compensation Committee assists the Board in discharging its responsibilities regarding the compensation of the
officers of the Company within the meaning of Section 16 of the Exchange Act (collectively, “Section 16 Officers”) and
members of the Board. The Compensation Committee is responsible for (i) overseeing the Company’s compensation plans,
policies and programs to appropriately retain individuals and incentivize performance in alignment with shareholder value
creation, (ii) assessing the appropriateness of their compensation in light of business, competitive and regulatory
considerations and (iii) evaluating the performance of the Section 16 Officers. In addition, the Compensation Committee
oversees compensation plans, policies and programs applicable to the Company’s directors, Section 16 Officers and other
employees, including equity-based plans such as the design of the Axon Enterprise, Inc. Amended and Restated 2022 Stock
Incentive Plan, the Axon Enterprise, Inc. 2024 eXponential Stock Plan and 2024 CEO Performance Award.
The Compensation Committee also oversees, in consultation with the NCG Committee, the Company’s policies, practices
and initiatives relating to human capital management, including workforce diversity, workplace culture, talent
development, retention and recruitment and employee engagement.
The Compensation Committee Report for the year ended December 31, 2024 is included in this proxy statement. See
“Executive Compensation—Compensation Discussion and Analysis—Compensation Committee Report” for more
information regarding the Compensation Committee.
The Compensation Committee’s primary responsibilities are set forth in its charter, which is subject to annual review and
revision. The full text of the Compensation Committee charter is available on our website at https://investor.axon.com/
Governance-Documents.
Nominating and Corporate Governance Committee
The NCG Committee assists the Board in overseeing (i) the process by which individuals are nominated to become Board
members; (ii) matters of corporate governance, including advising the Board on matters of (A) Board organization,
membership and function, such as Board evaluations, new Board member on-boarding and Board continuing education
programs and (B) committee structure and membership; and (iii) succession planning for Board members and executive
officers of the Company.
Axon Enterprise, Inc. | 2025 Proxy Statement | 19
In addition, in collaboration with other committees of the Board and the Company’s management as appropriate, the NCG
Committee identifies and monitors emerging corporate governance issues and trends that could be reasonably expected to
have a substantial impact on the Company, including any material environmental or sustainability-related issues and the
Company’s strategy with respect to social matters of significance to the Company.
The NCG Committee also periodically reviews the Company’s Corporate Governance Guidelines and other corporate
governance policies and recommends to the Board any changes that the Committee determines, in its sole discretion, to be
necessary or appropriate. Our Corporate Governance Guidelines reflect our commitment to corporate governance best
practices.
The NCG Committee’s primary responsibilities are set forth in its charter, which is subject to annual review and revision.
The full text of the NCG Committee charter is available on our website at https://investor.axon.com/Governance-
Documents.
Other Standing Committees
The Enterprise Risk and Compliance Committee
The Enterprise Risk and Compliance Committee assists the Board in overseeing our overall approach to enterprise risk
management and regularly reviews the categories of risk the Company faces. The Committee is also responsible for
overseeing the design, implementation and management of an effective information security program, including reviewing
and overseeing the Company’s policies and procedures relating to cybersecurity and data protection risks associated with
the Company’s products, services, information technology infrastructure and related operations. In addition, the Committee
oversees the Company’s artificial intelligence governance framework, which includes policies, processes, and technical
controls designed to ensure that artificial intelligence technologies are used responsibly, ethically, safely, and legally.
The Mergers and Acquisitions and Capital Structure Committee
The Mergers and Acquisitions and Capital Structure Committee serves to focus on issues related to any proposed merger,
acquisition or other strategic investment activity or plans identified by the Company’s management. It also provides
guidance and oversight on the Company’s financing decisions.
Director Independence
As of the date of this proxy statement, based upon the information submitted by each of its directors, the Board has made a
determination that a majority of our current Board is independent as that term is defined by the listing standards of The
Nasdaq Stock Market (the “NASDAQ Listing Standards”) and that all of the members of our Board committees also meet
any additional specific independence standards applicable to any committee on which such director serves, including the
more stringent audit committee and compensation committee independence criteria. In addition, each of the members of
our Compensation Committee is also a “non-employee director” (within the meaning of Rule 16b-3 under the Exchange
Act).
For 2024, the Company determined that all Board members, other than Patrick Smith and Matthew McBrady, were
independent under the applicable NASDAQ Listing Standards and SEC rules. Mr. P. Smith and Mr. McBrady are not
independent. Mr. P. Smith is not considered independent as he is the founder and CEO of the Company. Out of an
abundance of caution, the Board determined that Mr. McBrady is not independent given his long-standing social
relationship with Mr. P. Smith.
Audit Committee Financial Experts
The Board of Directors determined that Michael Garnreiter and Graham Smith, each an independent director of the
Company, is an audit committee financial expert within the meaning of that term under applicable SEC rules. See
“Governance—The Board of Directors” for information about the past business and educational experience of each of Mr.
Garnreiter and Mr. G. Smith. The Board has determined that each of the members of our Audit Committee is financially
literate and that each of Mr. Garnreiter and Mr. G. Smith satisfies the financial sophistication requirements under the
NASDAQ Listing Standards. As noted above, on March 4, 2024, the Board appointed Mr. G. Smith to succeed Mr.
Garnreiter as Audit Committee Chair.
Axon Enterprise, Inc. | 2025 Proxy Statement | 20
Board of Directors’ Role in Risk Oversight
The Company’s risk management process is intended to ensure that risks are taken knowingly and purposefully. The Board
has allocated and delegated primary responsibility for risk oversight responsibility to its committees: the Audit Committee,
the Compensation Committee, the NCG Committee, the Enterprise Risk and Compliance Committee and the Mergers and
Acquisitions and Capital Structure Committee.
The Audit Committee meets at least once a quarter and is responsible for oversight of the Company’s major financial risk
exposures and the steps management has taken to monitor and control such exposures. The Company maintains an internal
audit function that reports directly to the Audit Committee Chair and reports to the Audit Committee quarterly on the status
and health of internal controls. The Chief Legal Officer reports to the Audit Committee quarterly on potential ethics
complaints as well as the status of the Company’s pending litigation and any potential related party transactions. The Audit
Committee in turn reports to the full Board on the status of financial risks and internal controls at least once a quarter.
The Compensation Committee meets as needed and is responsible for oversight of the Company’s risks relating to its
compensation plans, policies and programs, as well as human capital management, including workforce diversity,
workplace culture, talent development, retention and recruitment and employee engagement. The Compensation
Committee reports regularly to the full Board regarding its activities.
The NCG Committee meets as needed and is responsible for oversight of risks relating to the Company’s corporate
governance practices and emerging corporate governance issues and trends that could be reasonably expected to have a
substantial impact on the Company, including any material environmental or sustainability-related issues and the
Company’s strategy with respect to social matters of significance to the Company. The NCG Committee reports regularly
to the full Board regarding its activities.
The Enterprise Risk and Compliance Committee typically meets at least quarterly and is responsible for oversight of the
Company’s information security, compliance and enterprise risks excepting the financial risks overseen by the Audit
Committee. Specifically, the Enterprise Risk and Compliance Committee provides oversight of the Company’s
cybersecurity and systems integrity practices, data protection, and risks and governance related to artificial intelligence. In
addition, the Enterprise Risk and Compliance Committee provides oversight of the Company’s compliance practices
(including import compliance, export compliance, Bureau of Alcohol, Tobacco & Firearms compliance, anti-bribery and
corruption compliance, modern slavery and anti-human trafficking compliance, labor and employment compliance,
workplace safety, data privacy, lobbying compliance and antitrust compliance). Enterprise Risk and Compliance
Committee meetings are informed by management who maintain a risk dashboard to monitor company-wide risks and
prioritize them based on potential likelihood and potential severity of impact to the Company. Risk mitigation strategies are
tracked and reported on by management to the Enterprise Risk and Compliance Committee at least once a quarter.
Likewise, the Enterprise Risk and Compliance Committee reports to the full Board on the highest priority risks and
mitigation strategies at least once a quarter.
The Mergers and Acquisitions and Capital Structure Committee typically meets at least quarterly and is responsible for
oversight of risks relating to the Company’s merger, acquisition or other strategic investment activity or plans identified by
the Company’s management. It also provides guidance and oversight on the Company’s financing decisions. The Mergers
and Acquisitions and Capital Structure Committee reports regularly to the full Board regarding its activities.
Corporate Compliance and Governance Principles
Corporate Governance Guidelines
Our Corporate Governance Guidelines address a broad set of issues integral to sound governance:
+ Board structure and composition
+ Risk oversight
+ Director independence
+ Management performance and compensation
+ Evaluation of board leadership
+ Conflicts of interest
+ Majority voting for directors
+ Director retirement policy
+ Succession planning
+ Director orientation and continuing education
+ Director responsibilities
Axon Enterprise, Inc. | 2025 Proxy Statement | 21
Our Board reviews our Corporate Governance Guidelines periodically, updating them from time to time as regulatory
requirements change and governance practices evolve. Our Nominating and Governance Committee is responsible for
overseeing our Corporate Governance Guidelines and for reporting and making recommendations to our Board concerning
corporate governance matters. Our Corporate Governance Guidelines are available at https://investor.axon.com/
Governance-Documents.
Succession Planning
The Nominating and Corporate Governance Committee engages in regular succession planning for the Board and executive
officers of the Company and its subsidiaries, including in the ordinary course and in anticipation of a potential unexpected
departure. Effective succession planning is important to our long-term success, and the Board and our executive team is
focused on development of internal talent and succession planning. The Board has the opportunity to meet with senior
management of various levels and functions within Axon throughout the year, both through formal Board meetings and
events and informal opportunities. This allows our Board members to better understand the longer-term succession
planning goals and development of management for future growth.
Code of Ethics
We are proud of the values with which we conduct our business. All employees, officers, contractors and directors of Axon
are required to abide by our Code of Ethics to help ensure that we consistently uphold the highest levels of business ethics
and personal integrity in all transactions and interactions, both internally and in dealings with our customers, vendor and
suppliers. We have also adopted a separate code of ethics for senior financial officers (the “Senior Financial Officer Code
of Ethics”) that is applicable to the CEO, Chief Financial Officer, Corporate Controller, Vice President of SEC Reporting
and others performing similar functions. Our Audit Committee assists our Board in fulfilling its oversight responsibility as
to our compliance with the goals and objectives in our Code of Conduct by reviewing and taking action regarding
compliance processes, standards and controls and reviewing results of relevant audits and investigations.
Our Code of Ethics covers a broad range of topics, including:
+ Expectations to conduct all Company business in accordance with applicable laws, rules, and regulatory requirement;
+ Adherence to fair competition, anti-corruption, and data protection laws;
+ Prohibition of financial or other interests that might conflict with the best interests of the Company;
+ Strict restrictions on insider trading, including trading limitations that apply to all directors, officers and employees
during designated periods;
+ Expectation to engage in honest, fair, and transparent dealings with customers, suppliers, competitors, and colleagues;
+ Commitment to equal employment opportunities and non-discrimination in hiring, promotions and workplace practices;
and
+ Prohibition of all forms of harassment, including sexual harassment, workplace bullying, and other inappropriate
behavior.
Our Senior Financial Officer Code of Ethics covers a broad range of topics, including:
+ Requirements to bring any material information that may affect disclosure in public filings as well as any deficiencies in
internal controls to the attention of the general counsel or CEO;
+ Prohibitions on actual or apparent conflicts of interest between personal and business relationships; and
+ Expectations to act with honesty and integrity.
A copy of the Company’s Code of Ethics and Senior Financial Officer Code of Ethics are published and available on our
website at https://investor.axon.com/Governance-Documents. The Company intends to disclose any future amendments or
waivers to the Code of Ethics and the Senior Financial Officer Code of Ethics that are required to be disclosed on the
Company’s website within four business days following the date of such amendment or waiver.
Shareholder Communications with Directors
Shareholders may communicate with members of the Board by mail addressed to the Chair, or any other individual
member of the Board, to the full Board, or to a particular committee of the Board. In each case, such correspondence
should be sent to the Company’s headquarters at 17800 North 85th Street, Scottsdale, AZ 85255. In general, any
shareholder communication about bona fide issues concerning the Company delivered to the Corporate Secretary for
forwarding to the Board or specified members will be forwarded in accordance with the shareholder’s instructions.
Axon Enterprise, Inc. | 2025 Proxy Statement | 22
DIRECTOR COMPENSATION
Members of the Board who are employees of the Company are not separately compensated for serving on the Board. Board
compensation is reviewed periodically by the Company’s Compensation Committee. Non-employee directors of the
Company are paid $10,000 in cash per quarter and are eligible to receive annual grants of restricted stock units (“RSUs”)
with a grant date fair value equal to approximately $200,000 vesting on the one-year anniversary of the grant. New Board
members are eligible to receive an initial grant of RSUs with a grant date fair value equal to approximately $200,000 in
their first year of service vesting in equal annual installments over three years. The Chair of the Board receives an
additional (i) $5,000 in cash per quarter and (ii) an annual grant of RSUs with a grant date fair value equal to
approximately $20,000 vesting on the one-year anniversary of the grant date. Board members who provide any special
Board advisory consultations in their official capacity as Board members (other than Board and committee meetings) are
compensated at the rate of $2,500 per day or $1,250 per half day, with no pay for travel days. All directors are reimbursed
for reasonable expenses incurred in connection with their attendance at meetings.
In addition, for the fiscal year ended December 31, 2024, Board members serving on committees in either the chair or
member capacity received fees as summarized in the following table:
Committee
Annual
Chair Fee
Annual
Member Fee
Audit
$
25,000 $
10,000
Compensation
15,000
7,500
Nominating and Corporate Governance
10,000
5,000
Mergers and Acquisitions and Capital Structure
10,000
6,000
Enterprise Risk and Compliance
10,000
6,000
The annual RSU awards are typically granted on the date of the Company’s annual meeting of shareholders. Directors have
the option of deferring all or a portion of their cash compensation into the TASER International, Inc. Deferred
Compensation Plan, the Company’s non-qualified deferred compensation plan (the “Deferred Compensation Plan”).
During 2024, the Compensation Committee continued the use of compensation consulting firm Semler Brossy Consulting
Group, LLC (“Semler Brossy”), which provided research, data analyses and benchmarking in adjusting compensation for
its directors. Semler Brossy provided director compensation data consistent with the peer group Semler Brossy identified in
2023 during our prior executive compensation review. The Compensation Committee’s compensation philosophy is to
generally set director compensation at approximately the 50% benchmark to peers, adjusted every three years. As a result
of the Compensation Committee's review during 2024, including with respect to the peer group information provided by
Semler Brossy, beginning in 2025, the Compensation Commitee determined that (i) the value of the annual grant of
restricted stock units for non-employee directors of the Company will be increased to $260,000 and (ii) the annual Chair
fee for the Compensation Committee will be increased to $25,000.
Axon Enterprise, Inc. | 2025 Proxy Statement | 23
The following table summarizes the compensation paid to non-employee directors for the fiscal year ended December 31,
2024.
Name
Fees Earned or
Paid in Cash
($)
Stock Awards
($) (1) (2)
All Other
Compensation
($) (5)
Total ($)
Current Directors
Erika Ayers Badan
$
45,000 $
199,354 $
— $
244,354
Adriane Brown
63,500
199,354
—
262,854
Julie Cullivan (3)
65,000
199,354
—
264,354
Michael Garnreiter
86,250
219,380
—
305,630
Caitlin Kalinowski
56,000
199,354
—
255,354
Matthew McBrady
66,000
199,354
—
265,354
Hadi Partovi
61,000
199,354
—
260,354
Graham Smith
74,750
199,354
—
274,104
Jeri Williams
56,000
199,354
—
255,354
Former Director
Mark Kroll (4)
$
52,500 $
275,911 $
111,117 $
439,528
(1)
Amounts in this column represent the aggregate grant date fair value of RSUs, computed in accordance with
stock-based compensation accounting rules in Financial Accounting Standards Board Accounting Standards
Codification Topic 718, Compensation—Stock Compensation (“ASC Topic 718”). The fair value of each RSU is
the closing price of our common stock on the date of grant. Each of our current non-employee directors received
an award of 657 RSUs on May 10, 2024, each of which will vest on the one-year anniversary of the grant on May
10, 2025. Mr. Kroll received an award of 919 RSUs on May 13, 2024, which will vest on the one-year anniversary
of the grant date, in connection with the Kroll Consulting Agreement (as defined below). Pursuant to SEC
regulations, the amounts shown exclude the impact of estimated forfeitures related to service-based vesting
conditions. The assumptions used in the calculations of the grant date fair values for such awards are included in
Note 1 to our consolidated financial statements for the fiscal year ended December 31, 2024 within our 2024
Annual Report.
The following table shows the aggregate number of RSUs outstanding for each director as of December 31, 2024.
Name
Aggregate
Restricted Stock
Units Outstanding
Erika Ayers Badan
1,351
Adriane Brown
657
Julie Cullivan
657
Michael Garnreiter
723
Caitlin Kalinowski
657
Matthew McBrady
657
Hadi Partovi
657
Graham Smith
1,271
Jeri Williams
1,271
(2)
Pursuant to his service as Chair of the Board, on May 10, 2024, Mr. Garnreiter received a grant of 66 shares,
which will vest on the one-year anniversary of the grant date.
(3)
Non-employee directors have the option of participating in the Deferred Compensation Plan through which
participants may elect to postpone the receipt and taxation of a portion of their cash compensation. All gains or
losses are allocated fully to participants and the Company does not guarantee a rate of return on deferred balances.
The Company does not make discretionary payments to the plan. There were no above-market returns for
Axon Enterprise, Inc. | 2025 Proxy Statement | 24
participants in the plan. Ms. Cullivan chose to participate in the Deferred Compensation Plan and elected to defer
$65,000 of earned compensation into the plan during the year ended December 31, 2024.
(4)
Dr. Mark Kroll, who served on the Board since 2003, resigned from the Board effective as of the date of the 2024
Annual Meeting. In accordance with SEC rules, the compensation paid to Mr. Kroll in fiscal 2024 has been
disclosed above. During his time on the Board, Dr. Kroll provided consulting services to the Company. In
connection with his resignation from the Board, Dr. Kroll entered into a consulting agreement with the Company
(the “Kroll Consulting Agreement”) on May 13, 2024, pursuant to which he will continue to provide advisory
consulting services to the Company, on an as-needed basis, for an initial two-year term. Pursuant to the Kroll
Consulting Agreement, Dr. Kroll is paid a monthly retainer and will receive an annual grant of restricted stock
units.
(5)
Other compensation for Dr. Kroll represents fees for consulting services provided during his time on the Board
and pursuant to the Kroll Consulting Agreement.
Director Stock Ownership Guidelines
The Board adopted stock ownership guidelines in December 2018. The stock ownership guidelines require that non-
employee directors hold Company stock equivalent to five times the dollar value of their base cash compensation; for 2024,
this equates to $200,000. New non-employee directors have up to three years to meet this requirement. If a director falls
below this requirement, he or she is not allowed to sell shares until the requirement is met.
Axon Enterprise, Inc. | 2025 Proxy Statement | 25
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The Company reviews all relationships and transactions in which the Company and its directors, director nominees,
executive officers or their immediate family members are participants, to determine whether such persons have a direct or
indirect material interest. Management is primarily responsible for the development and implementation of processes and
controls to obtain information from the directors and executive officers with respect to related party transactions and for
then determining, based on the facts and circumstances, whether the Company or a related party has a direct or indirect
material interest in the transaction. As required under SEC rules, transactions that are determined to be directly or indirectly
material to us or a related party are disclosed in this proxy statement.
The Company has a written related party policy, which is included within the Audit Committee Charter, wherein the Audit
Committee reviews, approves or ratifies related party transactions in accordance with NASDAQ Listing Standards. It is the
policy of the Company that all proposed transactions in excess of $120,000 between the Company and its directors,
officers, 5% shareholders and their affiliates should be entered into or approved only if such transactions are on terms no
less favorable to the Company than it could obtain from unaffiliated parties, are reasonably expected to benefit the
Company and are disclosed to the Audit Committee. The Audit Committee is authorized to consult with independent legal
counsel at the Company’s expense in determining whether to approve any such transaction.
Axon Enterprise, Inc. | 2025 Proxy Statement | 26
SHARE OWNERSHIP
OWNERSHIP OF EQUITY SECURITIES OF THE COMPANY
The following table sets forth information, as of March 31, 2025, with respect to beneficial ownership of the Company’s
common stock by each current director or nominee for director, by each of our named executive officers as defined by Item
402(a)(3) of Regulation S-K (the “NEOs”), by all directors and executive officers as a group, and by each person who is
known to the Company to be the beneficial owner of more than 5% of the Company’s outstanding common stock. The
Company believes that, except as otherwise described below, each named beneficial owner has sole voting and investment
power with respect to the shares listed.
Name of Beneficial Owner (1)
Shares
Beneficially
Owned
Shares
Acquirable
Within 60
Days (2)
Total
Beneficial
Ownership
Percent of
Class (3)
Beneficial Owners of More than 5%:
BlackRock, Inc. (4)
7,362,604
—
7,362,604
9.5 %
The Vanguard Group (5)
7,930,811
—
7,930,811
10.2 %
Directors and Named Executive Officers:
Patrick Smith (6)
2,900,883
20,931
2,921,814
3.8 %
Hadi Partovi (7)
235,477
657
236,134
*
Michael Garnreiter
23,536
723
24,259
*
Julie Cullivan
1,735
657
2,392
*
Caitlin Kalinowski
6,272
657
6,929
*
Matthew McBrady
3,235
657
3,892
*
Adriane Brown
6,723
657
7,380
*
Graham Smith
1,608
657
2,265
*
Jeri Williams
663
657
1,320
*
Erika Ayers Badan
347
657
1,004
*
Joshua Isner
116,019
—
116,019
*
Brittany Bagley
26,458
—
26,458
*
Jeffrey Kunins
92,427
—
92,427
*
Cameron Brooks
—
7,827
7,827
*
All directors and executive officers as a group (14 persons)
3,415,383
34,737
3,450,120
4.4 %
*
Less than 1%
(1)
Except as noted in Notes 4 and 5 below, the address of each person or group of persons listed above is c/o Axon
Enterprise, Inc., 17800 North 85th Street, Scottsdale, AZ 85255.
(2)
Reflects the number of shares that could be purchased by exercise of options exercisable at March 31, 2025, or
stock options or RSUs vesting within 60 days thereafter under the Company’s stock incentive plans.
(3)
Based on 77,848,148 shares outstanding as of March 31, 2025. For purposes of computing the percentage of
outstanding shares of our common stock held by each person or group of persons listed above, any security that
such person or group has the right to acquire within 60 days of March 31, 2025 is deemed to be outstanding for
the purpose of computing the percentage ownership of such person or group, but is not deemed to be outstanding
for the purpose of computing the percentage ownership of any other person or group.
Axon Enterprise, Inc. | 2025 Proxy Statement | 27
(4)
Represents shares of the Company’s common stock beneficially owned based on the Schedule 13G/A filed on
February 5, 2025 by BlackRock, Inc. In such filing, BlackRock, Inc. lists its address as 50 Hudson Yards New
York, NY 10001, and indicates it has sole voting power with respect to 6,895,795 shares of the Company’s
common stock, shared voting power with respect to no shares of the Company’s common stock, sole dispositive
power with respect to 7,362,604 shares of the Company’s common stock, and shared dispositive power with
respect to no shares of the Company’s common stock.
(5)
Represents shares of the Company’s common stock beneficially owned based on the Schedule 13G/A filed on
February 13, 2024 by The Vanguard Group. In such filing, The Vanguard Group lists its address as 100 Vanguard
Blvd., Malvern, PA 19355, and indicates it has sole voting power with respect to no shares of the Company’s
common stock, shared voting power with respect to 85,717 shares of the Company’s common stock, sole
dispositive power with respect to 7,688,393 shares of the Company’s common stock, and shared dispositive power
with respect to 242,418 shares of the Company’s common stock.
(6)
Mr. Smith holds 6,193 shares of the Company’s common stock in a joint account with his spouse, over which Mr.
Smith has shared voting and investment power.
(7)
Includes 209,691 shares of the Company’s common stock owned directly by Mr. Partovi in a standard margin
account and pledged as collateral to secure certain personal indebtedness. Such pledge is exempt from the
pledging limitation outlined in the Insider Trading Policy as it predates the effective date of such limitation. Based
on daily trading volume and the collateral representation of these shares, in conjunction with other personal assets,
the Board believes that this position does not pose a significant risk to shareholders or the Company.
Axon Enterprise, Inc. | 2025 Proxy Statement | 28
EXECUTIVE COMPENSATION
EXECUTIVE OFFICERS
See “Governance—The Board of Directors” for biographical information for Patrick Smith, who is also our CEO.
Joshua Isner
Title: President
Joined Axon in 2009
Age: 39
As President, Mr. Isner is responsible for Axon’s execution and driving its growth — including top line execution and
global expansion into new markets and new product categories — and managing other day-to-day functions. Mr. Isner
joined Axon in 2009 as a member of Axon’s Leadership Development Program and quickly established a strong track
record of delivering results. In 2014, Mr. Isner led Axon’s domestic body camera and cloud software sales team to a
record year and was subsequently promoted to Executive Vice President of Global Sales. In 2018, he stepped into the role
of Chief Revenue Officer, responsible for Axon’s global growth, customer service, professional services and sales
operations, successfully driving annual growth rates in excess of 25%. Mr. Isner was tapped to be Axon’s Chief Operating
Officer in 2022 and was shortly thereafter promoted to President in 2023. He is a keen operational leader who drives
discipline and prioritization across the business, and ensures that Axon is aggressively pursuing our total addressable
market opportunity, supported by a world-class team. Mr. Isner has a B.S. in Government & Political Science from
Harvard University.
Brittany Bagley
Title: Chief Operating Officer and Chief Financial Officer
Joined Axon in 2022
Age: 41
Ms. Bagley serves as Axon’s Chief Operating Officer and Chief Financial Officer with responsibility for further
integrating Axon’s financial functions with its operations, including manufacturing, supply chain and enterprise. Ms.
Bagley is also responsible for driving operational improvements to contribute to the strength of Axon’s income statement,
balance sheet and statement of cash flows, including through more streamlined management of cost of goods sold,
inventory and working capital. She joined the Company’s management team in September 2022 after serving as Chief
Financial Officer of Sonos, Inc. since April 2019. Ms. Bagley also served on the board of directors of Sonos, Inc. from
September 2017 to April 2019. From December 2017 to April 2019, Ms. Bagley served as a Managing Director of
Kohlberg Kravis Roberts & Co. L.P. (together with its affiliates, “KKR”), a global investment firm, and previously served
in other roles at KKR from July 2007 to December 2017. Prior to joining KKR, Ms. Bagley was an analyst at The
Goldman Sachs Group, Inc., an investment banking firm. Ms. Bagley has served on the board of directors of Aurora
Innovation, Inc., a self-driving technology company, since July 2021 and is currently the chair of its audit committee and
a member of its compensation committee. Ms. Bagley holds a B.A. in Economics, magna cum laude, from Brown
University.
Axon Enterprise, Inc. | 2025 Proxy Statement | 29
Jeffrey Kunins
Title: Chief Product Officer and Chief Technology Officer
Joined Axon in 2019
Age: 50
Mr. Kunins leads Axon’s global product, software and hardware engineering, artificial intelligence, design and security
teams — building Axon’s complete product suite, including body and in-car cameras, non-lethal de-escalation tools such
as TASER energy weapons, and Software-as-a-Service platforms for digital evidence management, productivity and real-
time operations. Since joining Axon in September 2019, Mr. Kunins has driven transformational expansion and up-
leveling of Axon’s global research and development organization and its ability to invent and deliver at scale. Prior to
Axon, Mr. Kunins served as Vice President of Alexa Entertainment at Amazon from February 2018. Mr. Kunins served as
the Vice President of Kindle at Amazon from March 2014 to February 2018. Prior to Amazon, Mr. Kunins served as
General Manager (“GM”) of Product and Design at Skype, GM of Windows Live Messenger at Microsoft and Vice
President of Product at Tellme Networks, Inc. Mr. Kunins has a B.S. in Information & Decision Systems from Carnegie
Mellon University.
Cameron Brooks
Title: Chief Revenue Officer
Joined Axon in 2024
Age: 55
Mr. Brooks leads the strategy and execution of all sales and services at Axon. Prior to Axon, Mr. Brooks was General
Manager of Europe, Middle East and Africa Public Sector for Amazon Web Services (“AWS”) where he served since
December 2017. Prior to AWS, Mr. Brooks served in various key roles at IBM, including Director of Public Sector for
IBM’s Watson Group, Public Sector Leader for IBM’s Middle East & Africa organization, and the Director of IBM’s
Government Healthcare business. Mr. Brooks holds a B.S. in Electrical Engineering from the University of Waterloo,
Canada, and MS and PhD degrees in Electrical Engineering from the University of Michigan. He also holds an MBA
degree from the New York University Stern School of Business.
Each executive officer serves at the discretion of our Board of Directors and we have entered into employment-related
agreements with each of the executive officers listed above. These agreements require notice of termination by the
Company in certain situations that are described in further detail in this proxy statement. See “Executive Compensation—
Compensation Discussion and Analysis—Employment Agreements and Other Arrangements with NEOs.”
Axon Enterprise, Inc. | 2025 Proxy Statement | 30
COMPENSATION DISCUSSION AND ANALYSIS
Our Named Executive Officers
The purpose of this Compensation Discussion and Analysis is to provide material information about our compensation
objectives and policies, with a focus on explaining and providing context for the material elements of the disclosure which
follows in this proxy statement with respect to the compensation of our NEOs in fiscal year 2024. Each of our five
executive officers is an NEO for fiscal year 2024:
•
Patrick Smith, our CEO;
•
Joshua Isner, our President;
•
Brittany Bagley, our Chief Operating Officer and Chief Financial Officer;
•
Jeffrey Kunins, our Chief Product Officer and Chief Technology Officer; and
•
Cameron Brooks, our Chief Revenue Officer
Our Compensation Philosophy
The Compensation Committee oversees matters relating to the fair and competitive compensation of our NEOs and non-
employee directors, together with matters relating to our compensation plans, policies and programs. The Compensation
Committee believes our executive compensation program should be market competitive to attract and retain highly
qualified individuals who are capable of making significant contributions critical to our long-term success, and
predominately delivered in the form of performance-based awards, including equity-based awards, which are designed to
promote incentives that are aligned with long-term shareholder interests. The objectives of our NEO compensation
programs include:
•
Attracting and retaining highly qualified individuals who are capable of making significant contributions critical
to our long-term success;
•
Promoting a performance-oriented environment that encourages Company and individual achievement;
•
Rewarding NEOs for long-term strategic management and the enhancement of shareholder value;
•
Strengthening the relationship between pay and performance by emphasizing variable, at-risk compensation that is
dependent upon the achievement of specified corporate and personal performance goals; and
•
Aligning long-term management interests with those of shareholders, including through long-term at-risk pay
At the 2024 Annual Meeting, shareholders approved the Amended and Restated 2022 Stock Incentive Plan, the 2024
Employee XSP and the 2024 CEO Performance Award (each as defined below), as well as vote on our overall compensation
program for fiscal year 2023 (referred to as the “say-on-pay” vote). The grants that were made in accordance with
shareholder approval are detailed below.
2024 Compensation Reflected Axon’s Strong 2024 Performance
Our financial and business highlights for 2024 include the following:
•
Annual revenue grew 33% to $2.1 billion, marking our third consecutive year of 30%+ annual growth
•
Annual recurring revenue grew 37% to $1.0 billion
•
Annual net income of $377 million supported Adjusted EBITDA of $521 million
•
Shipped more than 200,000 TASER devices, 300,000 body cameras and over 9 million cartridges
2024 marked the start of several new long-term equity compensation programs with our shareholders’ approval of the
Amended and Restated 2022 Stock Incentive Plan, the 2024 Employee XSP and the 2024 CEO Performance Award, the
details of which are described below. Because of our focus on our new long-term incentive programs, we made limited
adjustments to annual salary and annual cash incentive bonus programs in 2024.
•
Annual salaries remained unchanged in 2024 with the exception of Mr. Isner and Mr. Kunins, who received
increases commensurate with their promotions during 2023, as discussed in the prior year Proxy Statement.
Axon Enterprise, Inc. | 2025 Proxy Statement | 31
•
Annual cash incentive program paid out at 131.7% for our NEOs (other than our CEO who did not receive a
Company bonus), which aligns with our strong financial performance highlighted above and the outperformance
of key performance indicators: revenue, Adjusted EBITDA margin, new market bookings and new product
adoption.
Components of Executive Compensation and Initial 2024 Target Direct Compensation
We utilize various cash and non-cash compensation methods. The principal components of compensation in 2024 for our
NEOs (other than the CEO) consist of the following:
•
Annual salary;
•
Annual cash incentive bonus; and
•
Long-term equity compensation in the form of performance-based XSUs and service-based RSUs.
Each of these components is discussed further below. In addition, we offer benefit plans and retirement programs to our
executives. Any decision to materially increase compensation is based upon the objectives listed above, taking into account
all forms of compensation and individual achievement of performance goals. Decisions regarding the CEO’s compensation
are made by the Compensation Committee and reflect the same considerations used for the other NEOs. With respect to
CEO compensation, the primary component of our CEO's compensation is the 2024 CEO Performance Award, which
encourages long-term shareholder value creation via pre-set metrics and performance hurdles, along with stock price
appreciation. Under the terms of the CEO Employment Agreement (as defined below), Mr. Smith receives a base salary at
the minimum wage rate in the amount of $31,201, and is not entitled to any annual bonus or other short-term incentives.
The table below shows the composition of each NEO’s annualized target total direct compensation at the beginning of
2024. For details on total compensation earned by our NEOs, see “Executive Compensation—2024 Summary
Compensation Table.”
2024
Annual Salary (1)
Annual Target
Cash Incentive
Compensation (2)
Long-term Target
Equity
Compensation--
XSUs (3)
Long-term Target
Equity
Compensation--
RSUs (4)
Target Total
Direct
Compensation
Name
$
% Total
$
% Total
$
% Total
$
% Total
$
Patrick Smith
$ 31,201
0.4 % $
—
— % $ 7,143,000
99.6 % $
—
— % $
7,174,201
Joshua Isner
500,000
4.1
500,000
4.1
5,000,000
40.5
6,320,000
51.3
12,320,000
Brittany Bagley
450,000
6.9
600,000
9.2
2,250,000
34.6
3,200,000
49.3
6,500,000
Jeffrey Kunins
350,000
6.6
350,000
6.6
1,518,000
28.6
3,082,000
58.2
5,300,000
Cameron Brooks
400,000
8.4
600,000
12.6
1,500,000
31.6
2,250,000
47.4
4,750,000
(1)
Annual salary effective January 1, 2024, except for Mr. Brooks, whose effective start date was April 1, 2024. In
addition to the annual salary presented above, Mr. Brooks received a signing bonus of $300,000.
(2)
Presented at target levels. For details on the actual total annual cash incentive compensation earned by our NEOs,
see detail under “2024 Annual Cash Incentive Program.”
(3)
Reflects the annual target value of the 2024 CEO Performance Award granted to Mr. Smith and the value of the
awards granted under the 2024 Employee XSP to Mr. Isner, Ms. Bagley, Mr. Kunins and Mr. Brooks, as discussed
in more detail under “Components of Executive Compensation—Long-Term Performance-Based Equity
Compensation—2024 CEO Performance Award” and “—2024 eXponential Stock Plan.” These grants had an
annual target value of $7,143,000, 5,000,000, 2,250,000, 1,518,000, and 1,500,000, respectively, prior to the risk
multiplier of three and the duration multiplier of seven. The amounts in the table represent the amount of annual
target compensation that the executives have elected to receive over a seven-year period (2024 to 2030) in the
form of XSUs. For the aggregate grant date fair value of such awards, refer to the Summary Compensation Table.
(4)
Reflects the grant date fair value of RSUs that were granted in September 2023 and were intended to serve as
2024 compensation awards for Mr. Isner, Ms. Bagley and Mr. Kunins. For Mr. Brooks, this amount reflects the
grant date fair value of service-based RSUs granted in April 2024 in connection with his employment agreement
which were intended to serve as 2024 compensation awards as discussed in more detail under “Executive
Compensation — 2024 Grants of Plan-Based Awards”. These figures do not include the grant date fair value of
Axon Enterprise, Inc. | 2025 Proxy Statement | 32
the Contingent RSUs that were granted to Mr. Isner, Ms. Bagley and Mr. Kunins in December 2023 and to Mr.
Brooks in April 2024 which were intended to serve as 2024 compensation in the event that the 2024 Employee
XSP was not approved by shareholders, because those Contingent RSUs were forfeited in connection with the
approval of the 2024 Employee XSP in May 2024. The amounts of the corresponding XSU grants have been
included in the “Long-term Target Equity Compensation—XSUs” column. See “Long-Term Service-Based
Equity Compensation” section for additional information.
Annual Salary
Other than with respect to our CEO, salaries for NEOs are reviewed periodically, as well as at the time of a promotion or
other changes in responsibilities. Consistent with our goal for overall compensation, we set salaries at a competitive level to
ensure we can attract and retain our executives. There is no set percentile of market that we use and executive salaries vary
in their positioning to market depending on factors that may include tenure with the Company, results of personal,
department and corporate performance, complexity and scope of the executive’s responsibilities, and the perceived
detrimental effects to the Company that may result from such executive’s departure. The base salaries of our NEOs, other
than the CEO, reflect input from the CEO and are approved by the Compensation Committee after considering
compensation salary trends, total performance, overall level of responsibilities and compensation levels for comparable
positions in the market for executive talent based on salary surveys and compensation data from peer comparator group
companies.
For 2024, Mr. Isner and Mr. Kunins received salary increases of 17.6% and 7.7%, respectively, effective January 1, 2024,
reflecting their expanded responsibilities and expected value contributions following their promotions in fiscal 2023. No
other NEOs received salary increases in 2024.
2024 Annual Cash Incentive Program and 2024 Annual Cash Incentive Payouts
The objective of the annual cash incentive program has been to provide executives with a short-term, competitive cash
compensation opportunity, as well as to align executive rewards with Company performance. Each year, the Compensation
Committee reviews the framework for the annual cash incentive program, including the potential metrics and associated
weightings and goals, and approves these metrics and any additional metrics to the extent used to determine the payouts to
our NEOs. The Compensation Committee ensures the goals that are set at the beginning of the year are viewed as
challenging but achievable to help support execution against our annual financial and operational priorities to drive long-
term shareholder value. For decisions made regarding the 2025 annual cash incentive program, see “Shareholder
Engagement and Forward-Looking Compensation Decisions for 2025”.
Payouts to our NEOs (other than our CEO) under the 2024 annual cash incentive program were based on the achievement
of Company-wide annual financial and operational goals. The Compensation Committee believes the criteria for the annual
cash incentive program were challenging but achievable.
2024 Financial and Operational Goals
Metric
Threshold
Target
Maximum
Actual
Weight
Weighted
Payout
($ in millions)
Revenue(1)
$ 1,443.8
$ 1,925.0
$ 2,115.0
$ 2,040.0
30.0 %
39.1 %
Adjusted EBITDA Margin(1)
16.9 %
22.5 %
23.5 %
26.1 %
30.0
45.0 %
New Market Bookings
$ 750.0
$ 1,000.0
$ 1,250.0
$ 1,002.0
20.0
20.1 %
New Product Adoption
41.4 %
55.2 %
62.2 %
60.5 %
20.0
27.6 %
Actual attainment/plan payout
100 %
131.7 %
(1)
Revenue and Adjusted EBITDA metrics exclude the impact of acquired entities in 2024.
The annual financial and operational goals were based on revenue, Adjusted EBITDA margin, new market bookings and
new product adoption. These metrics each had a threshold, target and maximum goal with corresponding base payouts of
75%, 100% and 150% of target, respectively. Achievement of the 2024 cash incentive program metrics was measured after
the Company determined its earnings for 2024.
Axon Enterprise, Inc. | 2025 Proxy Statement | 33
The actual annual cash incentive program payouts to our NEOs for 2024 were as follows:
Annual Target Cash
Incentive
Compensation
Payout %
Cash Payout
Joshua Isner
$
500,000
131.7 % $
658,500
Brittany Bagley
$
600,000
131.7 % $
790,200
Jeffrey Kunins
$
350,000
131.7 % $
460,950
Cameron Brooks(1)
$
600,000
131.7 % $
576,393
(1)
Mr. Brooks’ cash payout was pro-rated based on the amount of time he was employed by the Company during
2024. The payout amount for Mr. Brooks was converted from euros to U.S. dollars based on the exchange rate on
the respective payout date.
Long-Term Performance-Based Equity Compensation
The Compensation Committee believes that our NEOs should be incentivized by compensation structures that encourage
measured risk taking with the aim of long-term, sustained shareholder value creation. As such, our compensation plans
balance operational metrics with stock price performance, alongside the goal of retaining key executive talent.
In alignment with our Compensation Committee, on May 10, 2024 our shareholders approved the following three
proposals that align with our compensation philosophy that supports the Company’s long-term growth strategy and drives
strong alignment with shareholder interest (each described in further detail below):
•
2024 CEO Performance Award
•
2024 eXponential Stock Plan
•
Amended and Restated 2022 Stock Incentive Plan
2024 CEO Performance Award
The Board of Directors granted our CEO a performance-based grant of XSUs (the “2024 CEO Performance Award”),
which was submitted to our shareholders for approval and subsequently approved by our shareholders on May 10, 2024.
The 2024 CEO Performance Award is performance-based and contingent upon the achievement of both stock price and
operational performance hurdles, subject to certain continued service requirements. The Compensation Committee
established a notional value for the 2024 CEO Performance Award of $150 million, representing approximately $7 million
of annual target long-term incentive value over the seven-year term of the CEO Employment Agreement (as defined
below), with a risk multiplier of three.
Simplified Formula: [($7 million annual value) x (7-year term)] x risk multiplier of 3 → approximately $150 million
The number of shares subject to the XSU award was calculated by dividing the notional value by a 90-day volume
weighted average price per share of Company common stock as of the day preceding the grant date.
2024 eXponential Stock Plan
On May 10, 2024, our shareholders approved the Axon Enterprise, Inc. 2024 eXponential Stock Plan (the “2024 Employee
XSP” or “XSP 2.0”), which provides for XSU awards to employees (other than our CEO), and grants of XSUs to our
NEOs (other than the CEO).The XSU awards are performance-based and contingent upon the achievement of the same
stock price and operational performance hurdles as the 2024 CEO Performance Award, subject to certain continued service
requirements. The number of shares subject to each XSU award was calculated by dividing the notional value of the award
determined by the Compensation Committee by a 90-day volume weighted average price per share of Company common
stock as of the day preceding the grant date.
The Company intends to continue granting XSUs in place of long-term performance-based RSUs given the strong
alignment with shareholder experience requiring meaningful growth in both stock price and operational performance. The
2024 Employee XSP recognizes Axon’s global growth potential and is designed to motivate our employees who are
instrumental to the innovation and development of Axon’s new products and who continue to deliver exceptional value to
Axon Enterprise, Inc. | 2025 Proxy Statement | 34
Axon. The program includes seven substantially equal tranches that will vest upon certification by the Compensation
Committee upon achievement of three independent vesting conditions, described in the following table:
Operational Goals(1)
(in millions)
Stock Price
Goal
Minimum Service Requirement
Tranche
Revenue
Adj.
EBITDA(2)
2024 Employee
XSP
2024 CEO
Performance
Award
Goal Expiration
1
$1,834
or
$382
and
$247.40
and
June 2025
December 2028
December 31, 2026
2
2,293
or
497
and
309.25
and
December 2025
December 2028
December 31, 2027
3
2,866
or
644
and
386.56
and
June 2026
December 2029
December 31, 2028
4
3,583
or
834
and
483.20
and
December 2026
December 2029
December 31, 2029
5
4,479
or
1,077
and
604.00
and
June 2027
December 2030
December 31, 2030
6
5,599
or
1,389
and
755.00
and
December 2027
December 2030
December 31, 2031
7
6,999
or
1,739
and
943.75
and
June 2028
December 2030
December 31, 2032
(1) Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with
the Company's first full fiscal quarter ending after the fiscal quarter in which the grant date occurred.
(2) In connection with certain acquisitions which were completed during fiscal year 2024, the Adjusted EBITDA
goals were adjusted as of December 31, 2024 as required by the terms of the 2024 Employee XSP and 2024 CEO
Performance Award, subject to adjustments as required by the terms of the 2024 Employee XSP and 2024 CEO
Performance Award.
The following table sets forth the awards under the 2024 CEO Performance Award and the 2024 Employee XSP made to
our NEOs in respect of 2024:
Named Executive
Number of
XSUs Awarded
Grant Date
Fair Value
Vested Shares (1)
Patrick Smith
679,102
$ 164,463,091
—
Joshua Isner
475,372
$ 113,705,689
—
Brittany Bagley
213,918
$
51,167,752
—
Jeffrey Kunins
144,323
$
34,521,146
—
Cameron Brooks
110,667
$
26,352,931
—
(1)
The performance metrics for tranches 1 and 2 of the 2024 Employee XSP and 2024 CEO Performance Plans were
certified as achieved by the Compensation Committee on March 24, 2025. However, due to minimum service
requirements, no shares are considered vested as of March 31, 2025.
Prior Programs
In 2018 and 2019, respectively, our shareholders approved the grant of a performance-based stock option award to our
CEO (the “2018 CEO Performance Award”) and grants of XSUs under the 2019 eXponential Stock Performance Plan (the
“2019 XSPP”). The 2018 CEO Performance Award consisted of 12 tranches with a vesting schedule based entirely on the
attainment of both market capitalization goals and operational goals, assuming our CEO’s continued employment and
service through each goal attainment date. Grants under the 2019 XSPP also consisted of 12 tranches of XSUs subject to
market capitalization goals and operational goals. The 2019 XSPP was broad-based: all eligible full-time U.S. employees
(other than our CEO) were granted XSUs, and certain employees, including our NEOs (other than our CEO) had the
opportunity to elect to allocate a percentage of their future target compensation and receive additional XSUs. As of June
30, 2023, all 12 tranches under the 2018 CEO Performance Award and the 2019 XSPP had vested.
Long-Term Service-Based Equity Compensation
On May 10, 2024, our shareholders approved the Amended and Restated 2022 Stock Incentive Plan (the “2022 Plan”). In
addition to the long-term performance-based equity awards described above, the Compensation Committee believes that
Axon Enterprise, Inc. | 2025 Proxy Statement | 35
service-based equity compensation under the 2022 Plan with multi-year vesting periods ensures that our NEOs have a
continuing stake in our long-term success, given the heightened risk-reward orientation of the XSUs.
As discussed in our prior year Proxy Statement, the Compensation Committee granted contingent RSUs (“Contingent
RSUs”) to Ms. Bagley and Messrs. Isner and Kunins in December 2023 in anticipation of the outcome of Proposal No. 3.
(relating to shareholder approval of the 2024 Employee XSP) at our 2023 Annual Meeting and Mr. Brooks was granted
Contingent RSUs in April 2024. Upon shareholder approval of the 2024 Employee XSP at the 2024 Annual Meeting, the
Contingent RSUs were forfeited and replaced with XSU grants under the 2024 Employee XSP.
In determining the total number of RSUs to award to each NEO (other than our CEO), the Compensation Committee
considered, among other things, the strategic objectives of the Company over the next three years and the practice of peer
comparator companies.
The following table sets forth the service-based RSU awards made to our NEOs in respect of 2024:
Named Executive
Number of
Service-based
RSUs Awarded
Grant Date
Fair Value
Patrick Smith
—
$
—
Joshua Isner (1)
10,279
$
3,149,794
Brittany Bagley (1)
3,213
$
984,560
Jeffrey Kunins (1)
2,185
$
669,550
Cameron Brooks (2)
23,715
$
7,384,140
(1)
The RSUs granted to Ms. Bagley and Messrs. Isner and Kunins were intended to compensate these executives for
the value equivalent to their on-target-earnings otherwise allocated to XSUs in the six-month period following
their promotions from July 1 through December 31, 2023. These RSUs vested in September 2024.
(2)
The RSUs granted to Mr. Brooks will vest as to one-third of the RSUs in May 2025, and the remaining two-thirds
of the RSUs will vest in eight substantially equal installments in August and November of 2025, March, May,
August and November of 2026, and March and May of 2027, subject to Mr. Brooks’ continued employment with
the Company through each applicable vesting date.
Axon Enterprise, Inc. | 2025 Proxy Statement | 36
Shareholder Engagement and Forward-Looking Compensation Decisions for 2025
2024 Shareholder Engagement Outreach Efforts
Number of shareholders
contacted:
Percent of Outstanding
Shares Contacted:
Percent of Outstanding
Shares Engaged:
>30
~60%
40%
The Compensation Committee values ongoing engagement with shareholders and carefully considers their feedback.
Axon’s current executive compensation program reflects enhancements made over the past five years in response to
shareholder input, particularly around aligning pay with performance and ensuring our compensation design drives long-
term shareholder value. Seeking feedback on our 2023 say-on-pay vote, we launched an expanded shareholder outreach
initiative during both the spring and fall of last year. Our goal was to better understand shareholder concerns and gather
input on desired changes to our executive compensation program. As part of this initiative, members of the Compensation
Committee and executive leadership team held direct conversations with shareholders to ensure that their perspectives were
heard and thoughtfully considered.
In Fall 2024, we conducted follow-up outreach, offering to engage with our top 25 shareholder groups to hear any
additional views. We also connected with investors outside of the top 25 who we had not reached in Spring 2024,
broadening the scope of our engagement.
The following table shows the composition of each NEO’s total target direct compensation for 2025. Other than with
respect to Mr. Isner, as described below, total target direct compensation for each NEO remained the same as of 2024:
2025
Annual Salary
Annual
Target Cash Incentive
Compensation
Long-term Target
Equity
Compensation--
XSUs (1)
Long-term Target
Equity
Compensation--
RSUs (2)
Target Total
Direct
Compensation
Name
$
% Total
$
% Total
$
% Total
$
% Total
$
Patrick Smith
$
31,201
0.4 %
$
—
— %
$ 7,143,000
99.6 %
$
—
— %
$
7,174,201
Joshua Isner (3)
125,000
1.1
425,000
3.6
5,000,000
42.1
6,320,000
53.2
11,870,000
Brittany Bagley
450,000
6.9
600,000
9.2
2,250,000
34.6
3,200,000
49.3
6,500,000
Jeffrey Kunins
350,000
6.6
350,000
6.6
1,518,000
28.6
3,082,000
58.2
5,300,000
Cameron Brooks
400,000
8.4
600,000
12.6
1,500,000
31.6
2,250,000
47.4
4,750,000
(1)
Reflects the value of the 2024 CEO Performance Award granted to Mr. Smith and the value of the awards granted
under the 2024 Employee XSP to Mr. Isner, Ms. Bagley, Mr. Kunins and Mr. Brooks, as discussed in more detail
under “Components of Executive Compensation—Long-Term Performance-Based Equity Compensation—2024
CEO Performance Award” and “—2024 eXponential Stock Plan.” The grants had an annual target value of
$7,143,000, $5,000,000, $2,250,000, $1,518,000 and $1,500,000, respectively, prior to the risk multiplier of three
and the duration multiplier of seven, and were granted in lieu of traditional performance-based RSUs. Represents
the amount of annual target compensation that the executives elected to receive over a seven-year period (2024 to
2030) in the form of XSUs. As the XSUs granted under the 2024 CEO Performance Award and the 2024
Employee XSP are intended to cover a seven-year period, no additional XSUs are expected to be granted during
2025.
(2)
Reflects the grant date value of RSUs vesting in 2025 that were granted in September 2023 for Ms. Bagley and
Messrs. Isner and Kunins, and granted in April 2024 for Mr. Brooks, which are intended to serve as 2025
compensation awards.
(3)
Mr. Isner and the Compensation Committee agreed that Mr. Isner would receive a reduced amount of annual cash
compensation during 2025 in exchange for the Company authorizing his use of private air travel for business
purposes in certain circumstances not currently covered by our utilization policy.
The Compensation Committee is committed to a compensation philosophy that supports the Company’s long-term growth
strategy and drives strong alignment with shareholder interests. Time- and performance-based equity awards are a core
component of this philosophy and reflect the Committee’s belief that long-term equity incentives are essential to retaining
and motivating executive talent to deliver sustained performance. In connection with prior year's executive promotions, the
Axon Enterprise, Inc. | 2025 Proxy Statement | 37
Company elected to set multi-year compensation terms—rather than make annual adjustments—to provide clarity and
focus for both management and shareholders. The pay levels disclosed above are intended to remain relatively consistent
over the next several years. As a general matter, a substantial majority of executive compensation is performance-based
(and approximately 100% in the case of the CEO), reinforcing our pay-for-performance philosophy and aligning
compensation outcomes with the creation of long-term shareholder value. The Company has also committed to a 3%
annual dilution target from stock based compensation expense, with these performance based plans specifically designed to
stay within this threshold.
Strong Governance in Determining Executive Compensation
Our Compensation Committee is currently composed of four independent directors: Hadi Partovi (Chair), Adriane Brown,
Michael Garnreiter and Graham Smith. The Compensation Committee makes the sole decision regarding compensation for
the CEO and each other NEO.
Members of management also attended these meetings, although the CEO and each other NEO were not present during
voting or deliberations on his or her compensation. The Compensation Committee generally receives and reviews materials
in advance of each meeting. Depending on the agenda for the particular meeting, materials may include:
•
Financial reports;
•
Reports on levels of achievement of corporate performance objectives;
•
Schedules setting forth the total compensation of the NEOs, including base salary, cash incentives, equity awards,
perquisites and other compensation and any potential amounts payable to the NEOs pursuant to employment,
severance and change of control agreements;
•
Summaries that show the NEOs’ total accumulated stock awards and stock option holdings;
•
Information regarding compensation paid by comparable companies identified in executive compensation surveys;
•
Reports from consultants and advisors to the Compensation Committee, including Semler Brossy; and
•
During 2024, the Compensation Committee also considered effect of the Revision on our executive compensation
programs, as described under “Clawback Policy” below.
Our executive management supports the Compensation Committee in carrying out its responsibilities by preliminarily
outlining compensation levels for NEOs, administering our compensation plans, policies and programs, and providing data
to the Compensation Committee for analysis. Periodically, compensation is initially proposed by the CEO for each
executive (excluding the CEO), consisting of annual base salary, annual cash incentive compensation and long-term equity
compensation, which is then provided to the Compensation Committee for review and approval.
Our Compensation Committee has sole authority to engage the services of outside consultants and advisors, as it deems
necessary or appropriate in the discharge of its duties and responsibilities. The Compensation Committee has budgetary
authority to authorize and pay for the services of outside consultants and advisors, and such consultants and advisors report
directly to the Compensation Committee.
The Compensation Committee’s compensation philosophy is to generally set executive and director compensation at
approximately the 50% benchmark to peers and engage a compensation consulting firm to provide research, data analyses,
benchmarking and design expertise in reviewing and structuring compensation programs for the Company’s NEOs
generally every three years, which began in 2018. Compensation generally stays flat in the interim years between
compensation studies although adjustments may be made if appropriate based on individual performance, Company
performance, relative shareholder returns and other relevant considerations. The Compensation Committee also considers
the results of the Company’s say-on-pay vote for the prior year to ensure that its decisions and the Company’s executive
compensation programs for the Company’s NEOs are aligned with long-term shareholder interests. For more detail
regarding how the results of the most recent shareholder advisory vote on executive compensation were considered in
making this year’s compensation decisions, see “Overview and Summary; Consideration of Prior Year Say-on-Pay Vote”
in Proposal No. 2.
Peer Comparator Group
The scope of Semler Brossy’s review in 2023 included determining an appropriate comparator group to which to compare
the Company’s executive compensation, based primarily on the following criteria: technology industry sector, revenue and
Axon Enterprise, Inc. | 2025 Proxy Statement | 38
revenue growth, valuation multiple and market capitalization. Semler Brossy selected public technology companies with
revenues between $435 million and $4 billion and three-month average market capitalization between $4 billion and $65
billion. We focused on including companies with similar revenue growth profiles.
Based on Semler Brossy’s analysis, the Compensation Committee selected the following comparator group when
reviewing executive compensation for 2024:
Alarm.com Holdings, Inc.
Fair Isaac Corporation
Procore Technologies
ANSYS
HEICO Corporation
PTC Inc.
Aspen Technology, Inc.
HubSpot
Samsara
Crowdstrike
MongoDB, Inc.
Tyler Technologies Inc.
Datadog
Palantir Technologies
Zscaler
Dynatrace, Inc.
Paycom Software, Inc.
Elastic N.V.
Paylocity Holding Corporation
In addition to the comparator group, to supplement the executive compensation information where publicly disclosed
information was limited, Semler Brossy provided executive compensation information for the NEOs using a survey sample
of technology companies with over $1 billion in revenue.
Compensation Policies and Practices
The Compensation Committee assists the Board of Directors in addressing matters relating to the fair and competitive
compensation of our NEOs and non-employee directors, together with matters relating to our other compensation practices
and policies. The most important policies applicable to our NEOs are described below.
Insider Trading Policy
We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of securities
of Axon by the Company, directors, officers, and employees that we believe are reasonably designed to promote
compliance with insider trading laws, rules and regulations. Our insider trading policy states, among other things, that the
Company and our directors, officers, and employees are prohibited from trading in such securities while in possession of
material, nonpublic information. The foregoing summary of our insider trading policies and procedures does not purport to
be complete and is qualified by reference to our Insider Trading Policy filed as an exhibit to our 2024 Annual Report.
NEO Stock Ownership Guidelines
The Board adopted stock ownership guidelines in December 2018. NEOs are required to own at least 50,000 shares of the
Company’s stock. For purposes of these guidelines, stock ownership includes shares for which the executive has direct or
indirect ownership or control, including Axon common stock plus vested and unvested Axon stock options and RSUs,
including unvested performance-based RSUs and XSUs. Executives are expected to meet their ownership guidelines once
they have received enough grants to add up to the required minimum.
Policy Regarding Hedging and Pledging Transactions
The Company’s Insider Trading Policy, which applies to all employees and directors, prohibits hedging and similar
transactions designed to decrease the risks associated with holding Company securities. Our pledging policy limits pledges
to 25% of a party’s total stock holdings at the time such loan(s) was originated. Any pledges in existence prior to the
adoption of such pledging policy are not subject to the 25% limitation, and any pledging arrangements must comply with
all applicable insider trading policies and pre-clearance procedures.
Clawback Policy
In accordance with SEC rules and NASDAQ Listing Standards, we adopted an incentive compensation recovery policy
(the “Clawback Policy”), effective as of December 1, 2023. Pursuant to the Clawback Policy, Axon is required to recover
or “clawback” any erroneously awarded incentive-based compensation received by its executive officers on or after
October 2, 2023, in the event that it is required to prepare an accounting restatement due to material noncompliance with
any financial reporting requirement under the securities laws, including any required accounting restatement to correct an
Axon Enterprise, Inc. | 2025 Proxy Statement | 39
error in previously issued financial statements that is material to the previously issued financial statements, or that would
result in a material misstatement if the error were corrected in the current period or left uncorrected in the current period.
In preparing the condensed consolidated financial statements as of September 30, 2024, we identified errors in our
previously issued financial statements related to our historical conclusions of principal vs. agent accounting of certain
reseller arrangements under ASC 606. The identified errors impacted our previously issued 2021 and 2022 annual financial
statements, 2023 quarterly and annual financial statements, and 2024 quarterly financial statements through June 30, 2024.
As such, we made adjustments to correct the prior period amounts presented in our 2024 Annual Report. Furthermore, we
made adjustments to correct for other previously identified immaterial errors, as described in Notes 23 and 24 to our
consolidated financial statements for the fiscal year ended December 31, 2024 within our 2024 Annual Report (the
“Revision”).
Under the Clawback Policy, we are required to recover any erroneously paid incentive-based compensation “received” by
executive officers during the three fiscal years preceding a restatement or revision. As a result of the Revision, we
conducted an analysis regarding whether recovery would be required in accordance with the Clawback Policy. We
concluded that awards under our 2018 CEO Performance Award and 2019 XSPP were not subject to potential clawback as
all amounts were received prior to October 2, 2023. Furthermore, awards under our 2024 Employee XSP and 2024 CEO
Performance Award were not subject to potential clawback because no payments had been made under the programs prior
to the Revision.
Accordingly, we concluded that only the annual cash incentives in respect of fiscal year 2023 were affected by the Revision
and subject to potential clawback under the Clawback Policy. Of the four metrics that determined cash incentive payouts in
respect of fiscal 2023, only Revenue and Adjusted EBITDA margin were affected by the Revision. Although the Revision
resulted in a reduction in Revenue, the total payout remained at the 200% maximum. Furthermore, the Revision resulted in
an increase to Adjusted EBITDA margin, which would have led to a greater payout of the 2023 cash incentives if based on
the revised financial statements. Therefore, we concluded that no recovery of erroneously awarded incentive-based
compensation was required as a result of the Revision.
The Audit Committee is actively overseeing the ongoing remediation efforts. Through collaboration with management, our
internal auditors and our independent auditors, the Audit Committee has and will continue to monitor and evaluate the
effectiveness of remediation efforts throughout the fiscal year ending December 31, 2025. Regular updates on progress
have been and will continue to be provided to the Board, with the Audit Committee ensuring management’s remediation
efforts are completed as soon as practicable. Please see our 2024 Annual Report for additional information regarding our
remediation efforts.
Equity Grant Practices
The Company does not have a formal policy relating to the timing of equity grants, but in practice seeks to avoid granting
awards within four days of the release of material, nonpublic information.
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires our directors and officers, and holders of more than 10 percent of our common
stock to file with the SEC reports regarding their ownership and changes in ownership of our common stock and other
equity securities of the Company. We believe that, during the year ended December 31, 2024, all such reports that were
required to be filed under Section 16(a) were timely filed, except one report relating to an October 2, 2024 transfer of stock
by Mr. Partovi, which was filed late on October 8, 2024 due to an administrative error. In making such statement, we have
relied upon examination of the copies of Forms 3, 4, and 5 provided to us and the written representations of our directors
and executive officers.
Employment Agreements and Other Arrangements with NEOs
CEO Employment Agreement with Patrick Smith
On December 8, 2023, the Company entered into an employment agreement (the “CEO Employment Agreement”) with
Mr. Smith. Under the CEO Employment Agreement, Mr. Smith will continue to serve as the Company’s CEO and remain a
member of the Board. The CEO Employment Agreement provides the specific terms and conditions of Mr. Smith’s
employment through December 31, 2030 and provides for at-will employment for an indefinite period thereafter.
Axon Enterprise, Inc. | 2025 Proxy Statement | 40
The CEO Employment Agreement generally provides for compensation opportunities to Mr. Smith in a lesser amount than
the Compensation Committee was otherwise willing to provide so that the Company could instead provide enhanced
compensation opportunities to other employees of the Company.
In particular, Mr. Smith will receive a base salary at the minimum wage rate (equating to $31,201 per year), and will not be
eligible for an increase prior to January 1, 2031. Mr. Smith will not be entitled to any annual bonus or other short-term
incentives. With the exception of the 2024 CEO Performance Award, Mr. Smith will also not be eligible for any equity
compensation awards prior to January 1, 2031.
Pursuant to the CEO Employment Agreement, Mr. Smith agreed that, if he terminates his employment for any reason on or
before December 31, 2030, Mr. Smith will promptly pay to the Company $30 million. In addition, Mr. Smith will be
subject to restrictive covenants related to competition, solicitation of Company employees and customers and
disparagement of the Company.
CEO Letter Agreement with Patrick Smith (Applicable to $25 Million Charitable Donation)
On December 8, 2023, the Company entered into a letter agreement (the “CEO Letter Agreement”) with Mr. Smith,
pursuant to which the Company agreed to waive the holding period on shares of Company common stock having a value of
approximately $25 million, which Mr. Smith acquired upon exercise of options pursuant to the 2018 CEO Performance
Award, so that Mr. Smith could contribute such shares to a charitable fund in 2023.
Pursuant to the CEO Letter Agreement, if Mr. Smith resigns for any reason on or before December 31, 2025, Mr. Smith
will promptly pay to the Company $25 million.
Employment Agreements with our NEOs
Each of our other NEOs is party to an employment agreement with the Company or an affiliate, which are intended to
ensure each executive’s continued employment and stability within our leadership team. The employment agreements with
each of Messrs. Isner and Kunins and Ms. Bagley are substantially similar and describe the terms and conditions of each
executive’s employment, including compensation levels, benefits and equity incentive eligibility, and also provide that the
executive may be terminated by the Company with or without cause or, solely in connection with a Change in Control (as
defined in the 2019 Stock Incentive Plan or 2022 Stock Incentive Plan), by the executive for good reason. The termination-
related benefits provided under these employment agreements are described in “Potential Payments Upon Termination on
Change of Control”. The employment agreement with Mr. Brooks contains similar terms and conditions as well as includes
certain statutory requirements under Greek law. Each of the employment agreements contains non-compete, non-solicit,
and non disparagement covenants, provided that the non-compete covenant in the employment agreement with Ms. Bagley
is not applicable so long as she resides and works in California.
Perquisites and Other Personal Benefits
We have a Deferred Compensation Plan for certain executives, key employees and non-employee directors through which
participants may elect to postpone the receipt and taxation of a portion of their compensation received from us. The
Deferred Compensation Plan allows eligible participants to defer up to 80% of their base salary and up to 100% of other
types of compensation. The plan also allows for matching and discretionary employer contributions. Employee deferrals
are deemed 100% vested upon contribution. Distributions from the plan generally commence upon retirement, death,
separation of service, a specified date or upon the occurrence of an unforeseeable emergency. Distributions can be paid in a
variety of forms from lump sum to installments over a period of years. Participants in the plan are entitled to select from a
wide variety of investments available under the plan and are allocated gains or losses based upon the performance of the
investments selected by the participant. All gains or losses are allocated fully to plan participants and we do not guarantee a
rate of return on deferred balances. Assets related to this plan consist of corporate-owned life insurance contracts.
Participants have no rights or claims with respect to any plan assets and any such assets are subject to the claims of our
general creditors.
We provide, subject to the terms of our utilization policy, private air transportation coordinated by the Company for
business use, with incidental personal use permitted under certain circumstances as approved by the Chair of the
Compensation Committee. We also provide our NEOs with the option of utilizing concierge medical services. Other than
as described above, we do not provide our NEOs with other significant perquisites or other benefits, except for Company
matching contributions to our defined contribution benefit plans and health care benefits that are widely available to
Axon Enterprise, Inc. | 2025 Proxy Statement | 41
employees. The Compensation Committee periodically reviews the levels of perquisites and other benefits that could be
provided to the NEOs.
COMPENSATION COMMITTEE REPORT
The Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis
included in this proxy statement. Based on these reviews and discussions, the Compensation Committee recommended to
the Board of Directors that the Compensation Discussion and Analysis be included in this proxy statement.
The Compensation Committee:
Hadi Partovi, Chair
Adriane Brown
Michael Garnreiter
Graham Smith
The foregoing Compensation Committee Report does not constitute soliciting material and will not be deemed to be filed or
incorporated by reference by any general statement incorporating by reference this proxy statement into any other
Company filing under the Securities Act or Exchange Act, except to the extent the Company specifically incorporates this
Report by express reference therein.
Axon Enterprise, Inc. | 2025 Proxy Statement | 42
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
No member of the Compensation Committee is, or was during or prior to 2024, an officer or employee of the Company or
any of its subsidiaries. None of the Company’s executive officers serves as a director or member of the compensation
committee of another entity in a case where an executive officer of such other entity serves as a director or member of the
Compensation Committee.
2024 SUMMARY COMPENSATION TABLE
The following Summary Compensation Table provides information concerning the 2024 compensation of our CEO and
other NEOs as of the end of the fiscal year. For a complete understanding of the table, please read the footnotes and
narrative disclosures that follow the table.
As discussed above, the 2024 CEO Performance Award and 2024 Employee XSP are high-risk, high-reward compensation
plans that are 100% performance-based, with vesting of the underlying XSUs entirely tied to the achievement of three
independent vesting conditions: (i) stock price goals; (ii) operational goals; and (iii) minimum service requirements.
Although these grants are intended to compensate our NEOs over a seven-year term (2024 to 2030), to comply with SEC
rules, the entire grant date fair value has been included in the table(s) below. For the annual amount of target compensation
under these plans, calculated prior to the risk multiplier of three and the duration multiplier of seven, refer to “Components
of Executive Compensation and Initial 2024 Target Direct Compensation” above.
Name and Principal
Position
Year
Salary
($)
Bonus (6)
($)
Stock
Awards (1)
($)
Non-Equity
Incentive Plan
Compensation (2)
($)
All Other
Compensation (3)
($)
Total ($)
Patrick Smith
2024
$
31,201
(4)
$
—
$ 164,463,091
(5)
$
—
$
31,429
$
164,525,721
Chief Executive Officer
2023
31,201
(4)
—
—
—
8,857
40,058
2022
31,201
(4)
—
—
—
2,002
33,203
Joshua Isner
2024
500,000
—
116,855,483
658,500
54,238
118,068,221
President
2023
425,000
—
29,955,689
1,066,500
43,608
31,490,797
2022
350,000
—
2,991,859
1,313,583
31,931
4,687,373
Brittany Bagley
2024
450,000
—
52,152,312
790,200
27,802
53,420,314
Chief Operating Officer and
Chief Financial Officer
2023
450,000
—
8,932,642
892,563
24,769
10,299,974
2022
121,023
—
13,872,891
179,910
4,191
14,178,015
Jeffrey Kunins
2024
350,000
—
35,190,696
460,950
30,193
36,031,839
Chief Product Officer and
Chief Technology Officer
2023
325,000
—
10,480,425
521,304
33,313
11,360,042
2022
300,000
—
1,650,096
451,320
28,452
2,429,868
Cameron Brooks
2024
304,342
(7)
300,000
37,018,911
576,393
16,742
38,216,388
Chief Revenue Officer
(1)
The amounts in this column reflect the aggregate grant date fair value of RSUs and XSUs computed in accordance
with ASC Topic 718. Pursuant to SEC regulations, the amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. The assumptions used in the calculations of the grant date fair values
for such awards are included in Note 1 to our consolidated financial statements for the fiscal year ended
December 31, 2024 within our 2024 Annual Report.
Amounts of $984,560, $3,149,794, and $669,550 represent RSUs granted to Ms. Bagley and Messrs. Isner and
Kunins, respectively, in March 2024. Mr. Brooks received $7,384,140 of RSUs granted in April 2024.
Amounts of $51,167,752, $113,705,689, $34,521,146, and $26,352,931 represent XSUs granted to Ms. Bagley
and Messrs. Isner, Kunins and Brooks, respectively, pursuant to the 2024 Employee XSP in May 2024. The
vesting of these XSUs is 100% performance-based and entirely tied to the achievement of three independent
vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service requirements. Although
these amounts represent target compensation over a seven-year term, to comply with SEC rules, the entire grant
Axon Enterprise, Inc. | 2025 Proxy Statement | 43
date fair value has been included for these NEOs. Mr. Brooks also received a grant of Contingent RSUs in the
amount of $3,281,840 in April 2024 which was intended to serve as 2024 compensation in the event that the 2024
Employee XSP was not approved by shareholders. These Contingent RSUs were forfeited in connection with the
approval of the 2024 Employee XSP in May 2024. Mr. Smith received $164,463,091 of XSUs, pursuant to the
2024 CEO Performance Award. Although the award represents target compensation for our CEO over a seven-
year term, to comply with SEC rules, the entire grant date fair value has been included for Mr. Smith.
(2)
In 2024, Ms. Bagley and Messrs. Isner, Kunins and Brooks received non-equity, cash-based incentive
compensation payments as a result of exceeding target metrics around revenue and other goals during 2024. This
incentive compensation was paid in February and March 2025.
(3)
All other compensation consists of matching contributions made to our 401(k) plan, contributions to health
savings accounts, employer-paid life insurance premiums, taxable fringe items and payments made for taxes
required to gross-up other earnings. Compensation for Messrs. Smith and Isner also include costs of supplemental
medical services, and $4,079 and $21,982 in respect of personal use of Company-provided private air
transportation for Messrs. Smith and Isner, respectively.
(4)
The amounts paid to Mr. Smith for 2024, 2023 and 2022 are consistent with minimum wage requirements.
(5)
The amount reported for Mr. Smith represents the grant date fair value of XSUs under the 2024 CEO Performance
Award as computed in accordance with ASC Topic 718. Mr. Smith did not realize this amount in 2024 because
the vesting of these XSUs is 100% performance-based and entirely tied to the achievement of three independent
vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service requirements. None of
the tranches of the 2024 CEO Performance Award will vest simply through the passage of time. The fair value of
the 2024 CEO Performance Award when initially approved by our Board in December 2023 was $150 million.
Due to a significant increase in the price of the Company's common stock between December 2023 and May 10,
2024, when our shareholders approved the 2024 CEO Performance Award, the grant date fair value for accounting
purposes increased to the amount disclosed in this Summary Compensation Table.
The 2024 CEO Performance Award granted to Mr. Smith is an incentive for future performance in the form of a
high-risk, high-reward compensation plan, and the value is realizable only if and when each set of stock price and
operational goals are achieved and the underlying XSUs associated with each tranche vest. The grant is intended
to compensate Mr. Smith over a seven-year term. If any tranche has not vested by the end of the seven-year term
of the award, the tranche will be forfeited and Mr. Smith will not realize the value of such tranche. Mr. Smith is
not expected to receive further equity-based awards from the Company during the term of the 2024 CEO
Performance Award.
The amounts and timing of compensation realized by Mr. Smith for the CEO Performance Award will differ from
the amount reported here pursuant to the requirements for the Summary Compensation Table. See “Executive
Compensation — Compensation Discussion and Analysis — Our Compensation Programs — 2024 CEO
Performance Award” above.
(6)
The amount reported for Mr. Brooks represents a signing bonus granted upon joining the Company.
(7)
Mr. Brooks’ salary was converted from euros to U.S. dollars utilizing the exchange rate on the respective payout
dates.
Axon Enterprise, Inc. | 2025 Proxy Statement | 44
2024 GRANTS OF PLAN-BASED AWARDS
The following table shows information about awards made under various compensation plans during 2024:
Name
Grant
Date
Estimated future payouts under
non-equity incentive
plan awards
All other
stock
awards:
number of
shares of
stock or
units (#)
Grant date
fair
value of stock
awards (1)
($)
Threshold
($)
Target
($)
Maximum
($)
Patrick Smith
5/10/2024
(3)
—
—
—
679,102
164,463,091
—
—
— (5)
Joshua Isner
3/14/2024
(2)
—
—
—
10,279
3,149,794
5/10/2024
(3)
—
—
—
475,372
113,705,689
375,000
500,000
825,000 (5)
—
—
Brittany Bagley
3/14/2024
(2)
—
—
—
3,213
984,560
5/10/2024
(3)
—
—
—
213,918
51,167,752
450,000
600,000
990,000 (5)
—
—
Jeffrey Kunins
3/14/2024
(2)
—
—
—
2,185
669,550
5/10/2024
(3)
—
—
—
144,323
34,521,146
262,500
350,000
577,500 (5)
—
—
Cameron Brooks
4/1/2024
(6)
—
—
—
10,540
3,281,840
4/1/2024
(4)
—
—
—
23,715
7,384,140
5/10/2024
(3)
—
—
—
110,667
26,352,931
450,000
600,000
990,000 (5)
—
—
(1)
Grant date fair value of the RSUs and XSUs is computed in accordance with ASC Topic 718. The fair value of
each RSU is the closing price of our common stock on the date of grant. The assumptions used in the calculations
of the grant date fair values for such awards are included in Note 1 to our consolidated financial statements for the
fiscal year ended December 31, 2024 within our 2024 Annual Report.
(2)
Ms. Bagley and Messrs. Isner and Kunins were granted service-based RSUs which vested in September 2024. The
number of RSUs granted was calculated by using $194.58, which was the closing price of a share of the
Company’s common stock on July 3, 2023. These awards were intended to compensate these executives for the
value equivalent to their on-target-earnings otherwise allocated to XSUs in the six-month period following their
promotions from July 1 through December 31, 2023.
(3)
Ms. Bagley and Messrs. Isner, Kunins and Brooks were granted 213,918, 475,372, 144,323, and 110,667 XSUs,
respectively, on May 10, 2024 pursuant to the 2024 Employee XSP. The number of XSUs granted to Ms. Bagley
and Messrs. Isner and Kunins was calculated by using a price per share of $220.88, which was the 90-day volume
weighted average price of a share of the Company’s common stock as of December 21, 2023 (the day before the
original grant date, subject to shareholder approval). The number of XSUs granted to Mr. Brooks was calculated
by using a price per share of $284.64, which was the 90-day volume weighted average price of a share of the
Company’s common stock as of March 29, 2024 (the business day before the original grant date, subject to
shareholder approval). The XSUs were granted in seven substantially equal tranches that will vest upon
certification by the Compensation Committee upon achievement of three independent vesting conditions: (1) stock
price goals; (2) operational goals; and (3) minimum service conditions, described in Note 16 to our consolidated
financial statements for the fiscal year ended December 31, 2024 within our 2024 Annual Report.
Mr. Smith was granted 679,102 XSUs on May 10, 2024, pursuant to the 2024 CEO Performance Award. The
number of XSUs granted was calculated by using a price per share of $220.88, which was the 90-day volume
Axon Enterprise, Inc. | 2025 Proxy Statement | 45
weighted average price of a share of the Company’s common stock as of December 21, 2023 (the day before the
grant date). The XSUs were granted in seven substantially equal tranches that will vest upon certification by the
Compensation Committee upon achievement of three independent vesting conditions: (1) stock price goals; (2)
operational goals; and (3) minimum service conditions, described in Note 16 to our consolidated financial
statements for the fiscal year ended December 31, 2024 within our 2024 Annual Report. The stock price goals and
operational goals applicable to the 2024 CEO Performance Award are identical to those under the 2024 Employee
XSP, but Mr. Smith is subject to a longer minimum required service period.
(4)
Mr. Brooks will vest as to one-third of the RSUs in May 2025, and the remaining two-thirds in eight substantially
equal installments in August and November 2025, March, May, August and November 2026, and March and May
2027, subject to Mr. Brooks’ continued employment with the Company through the applicable vesting date.
(5)
Payouts under the 2025 annual cash incentive program are based on the achievement of annual financial and
operational goals, including goals related to revenue, Adjusted EBITDA margin, new market bookings, new
product bookings and new product adoption. Actual awards earned in 2024 were included in the non-equity
incentive plan compensation column in the 2024 Summary Compensation Table. See further discussion under
“Executive Compensation—Compensation Discussion and Analysis—2024 Annual Cash Incentive Program
Payouts.”
(6)
Mr. Brooks was granted 10,540 Contingent RSUs in April 2024 which were intended to serve as 2024
compensation in the event that the 2024 Employee XSP was not approved by shareholders. Those Contingent
RSUs were forfeited in connection with the approval of the 2024 Employee XSP in May 2024.
Axon Enterprise, Inc. | 2025 Proxy Statement | 46
OUTSTANDING EQUITY AWARDS AT FISCAL 2024 YEAR-END
The following table includes certain information with respect to all outstanding equity awards previously awarded to the
NEOs as of December 31, 2024.
Option Awards
Stock Awards
Name
Number of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
Equity
Incentive
Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)
Option
Exercise
Price
($)
Option
Expiration
Date
Number of
Shares or
Units
of Stock
That
Have Not
Vested
(#)
Market
Value
of Shares
or Units
of Stock
That Have
Not Vested
($)
Equity
Incentive
Plan Awards:
Number of
Unearned
Shares,
Units or
Other
Rights That
Have
Not Vested
(#)
Equity
Incentive
Plan Awards:
Market or
Payout
Value of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested
($)
Patrick Smith
20,931
(1)
—
$ 28.58 2/26/2028
679,102
(8) $ 403,603,901
Joshua Isner
—
—
—
475,372
(9)
282,523,087
1,585
(2)
941,997
3,952
(3)
2,348,753
60,336
(4)
35,858,892
Brittany Bagley
—
—
—
213,918
(9)
127,135,746
24,938
(5)
14,821,152
7,094
(6)
4,216,106
17,988
(4)
10,690,628
Jeffrey Kunins
—
—
—
144,323
(9)
85,774,045
2,964
(3)
1,761,564
25,440
(4)
15,119,501
3,412
(7)
2,027,820
Cameron Brooks
—
—
—
110,667
(9)
65,771,611
23,715
(10)
14,094,299
(1)
These option awards were granted to Mr. Smith pursuant to the 2018 CEO Performance Award, as discussed in
further detail in our prior year Proxy Statement.
(2)
This stock award vests at annual intervals over a three-year period and becomes fully vested in June 2025.
(3)
These stock awards vest at annual intervals over a three-year period and become fully vested in December 2025.
(4)
These stock awards vest at annual intervals over a three-year period and become fully vested in August 2026.
(5)
This stock award vests at annual intervals over a three-year period and becomes fully vested in September 2025.
(6)
This stock award vests one third in September 2023 and the remaining two-thirds vest in eight equal quarterly
installments until fully vested in September 2025.
(7)
This stock award vests one-third in December 2024, one-third in August 2025 and the final one-third in August
2026.
(8)
This stock award granted to Mr. Smith pursuant to the 2024 CEO Performance Award vests upon the achievement
of three independent vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service
conditions. The stock price goals and operational goals applicable to the 2024 CEO Performance Award are
Axon Enterprise, Inc. | 2025 Proxy Statement | 47
identical to those under the 2024 Employee XSP, but Mr. Smith is subject to a longer minimum required service
period.
(9)
These stock awards granted pursuant to the 2024 Employee XSP vest upon the achievement of three independent
vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service conditions.
(10) This stock award vests one-third in May 2025 and the remaining two-thirds in eight substantially equal quarterly
installments until fully vested in May 2027.
Axon Enterprise, Inc. | 2025 Proxy Statement | 48
2024 OPTION EXERCISES AND STOCK VESTED
The following table provides information related to option exercises for each NEO during the year ended December 31,
2024:
Option Awards
Name
Number of
Shares
Acquired on
Exercise (#)
Value Realized
on
Exercise ($)
Patrick Smith
510,000
$ 178,120,187
The option awards exercised by Mr. Smith in 2024 related solely to the 2018 CEO Performance Award, and the net shares
are subject to a 2.5 year post-exercise holding period.
The following table provides information related to vested stock awards for each NEO during the year ended December 31,
2024:
Stock Awards
Name
Number of
Shares
Acquired upon
Vesting (#)
Value Realized
on
Vesting ($)
Patrick Smith
— $
—
Joshua Isner
55,352
21,696,120
Brittany Bagley
39,478
15,294,980
Jeffrey Kunins
21,808
10,138,001
Cameron Brooks
—
—
No awards under the 2024 CEO Performance Award or 2024 Employee XSP vested during the year ended December 31,
2024.
Axon Enterprise, Inc. | 2025 Proxy Statement | 49
2024 NONQUALIFIED DEFERRED COMPENSATION
On July 1, 2013, the Company adopted our Deferred Compensation Plan. The Deferred Compensation Plan allows eligible
executives, key employees and non-employee directors to elect to defer the receipt and taxation of a portion of their
compensation. Compensation, as defined in the Deferred Compensation Plan, is comprised of base salary, bonus,
commission, director fees and such other cash or equity-based compensation approved by the Compensation Committee.
Participants may elect to defer up to 80% of their base salary and up to 100% of other types of compensation. Participants
are 100% vested at all times in amounts deferred pursuant to the Deferred Compensation Plan. All gains or losses are
allocated fully to plan participants, and the Company does not guarantee a rate of return on deferred balances. There were
no above-market returns for participants in the Deferred Compensation Plan.
The following table provides information on NEO participation in the Deferred Compensation Plan:
Name
Executive
Contributions in
Last FY (1)
($)
Registrant
Contributions in
Last FY (2)
($)
Aggregate
Earnings in Last
FY (2)(3)
($)
Aggregate
Withdrawals/
Distributions in
Last FY
($)
Aggregate
Balance at
Last FYE (4)
($)
Joshua Isner
—
—
19,551
—
154,466
Brittany Bagley(1)
395,100
—
—
—
—
(1)
Ms. Bagley elected to contribute 50% of her 2024 bonus (as reflected in the Summary Compensation Table) to the
Deferred Compensation Plan. Such amount is reflected above, although the amount was deferred into the Deferred
Compensation Plan in March 2025.
(2)
The Company does not make discretionary payments to the Deferred Compensation Plan but does make a
restorative 401(k) match contribution to participants as their eligible wages for 401(k) purposes is net of
contributions made to the Deferred Compensation Plan.
(3)
Aggregate earnings reflected represent deemed investment earnings from voluntary deferrals and Company
contributions, as applicable. No amounts included in aggregate earnings are reported in the Summary
Compensation Table because the Deferred Compensation Plan does not provide for above-market or preferential
earnings.
(4)
Of the amount reflected in this column, $436,508 was previously reported as compensation in the Summary
Compensation Table for 2021 and previous years and $600,152 has been reported as aggregate withdrawals and
distributions for 2023 and previous years. No withdrawals or distributions were made in 2024. No executive
contributions or Company contributions were made in 2022, 2023 and 2024.
Axon Enterprise, Inc. | 2025 Proxy Statement | 50
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE OF CONTROL
Pursuant to the employment agreements with our NEOs (other than our CEO), the Company may terminate each of the
NEOs with or without cause. The conditions or events triggering the payment of cash severance benefits include the
executive’s termination without cause, termination in certain circumstances in connection with a change in control of the
Company (i.e., double-trigger), and death or disability. Cash severance benefits are payable in substantially equal
installments in accordance with the Company's standard payroll practices and applicable law, and any bonuses are paid at
the time such bonuses are paid to other employees of the Company generally. Conditions to the payment of severance
benefits include the execution (and non-revocation) of a release in favor of the Company and continued compliance with
certain restrictive covenants relating to assignment of inventions, nondisclosure of Company confidential information, and
(if applicable) non-competition with the Company for a period of 12 months after termination of employment.
The severance benefit amounts with respect to the above triggering events were determined based on competitive practices.
The Company agreed to pay these variable amounts of compensation as severance benefits in order to attract and retain
executive officers.
The table below depicts the severance benefits payable to each of the NEOs (other than our CEO) under the conditions
indicated, other than with respect to awards under the 2024 CEO Performance Award and the 2024 Employee XSP, which
are described below:
Termination for
Cause
Termination without Cause
Termination By Executive Within
36 Months Following a Change
in Control For Good Reason or by
the Company Without Cause
Six Months Prior to Change in
Control at the Request of a Third-
Party Purchaser
(“Change in Control”)
Death or Disability
Earned but
unpaid salary and
benefits
12 months’ salary
continuation(1);
annual target bonus for the
year in which termination
occurs;
time-based RSUs vesting
during notice and severance
period continue to
vest
36 months’ salary continuation(3);
pro rata portion of annual target
bonus for the year in which
termination
occurs; 12 months’ healthcare
benefits(2);
time-based RSUs vest
18 months’ salary
continuation(3);
pro rata portion of annual
target bonus for the year in
which death or disability
occurs;
time-based RSUs vest
(1) The payment of 12 months’ salary includes an 11-month notice period and a cash payment equal to one month’s
base salary. For Mr. Brooks, benefits payable are the higher of either 12 months' salary or a statutory severance
payment (although no statutory severance payment is required if the executive's employment is terminated within
one year of employment start date).
(2) Healthcare benefits include a lump sum payment equal to 12 months of COBRA premiums (including medical and
dental coverage) for Messrs. Isner and Kunins and Ms. Bagley, and 12 months of healthcare benefits for Mr.
Brooks.
(3) Mr. Brooks would receive a statutory severance payment in lieu of salary payment.
Axon Enterprise, Inc. | 2025 Proxy Statement | 51
Additional accelerated vesting conditions pursuant to the 2024 CEO Performance Award and the 2024 Employee XSP are
as follows:
2024 CEO Performance Award
(Patrick Smith)
2024 Employee XSP
(all other NEOs)
Termination for Cause
Any tranches of the CEO Performance
Award that are unvested as of the date
of termination are forfeited
Any tranches of the 2024 Employee
XSP that are unvested as of the date of
termination are forfeited
Termination without Cause
Operational goals are disregarded and
all tranches for which stock price goals
have been attained as of the date of
termination vest; next unattained
tranche will partially vest on a prorated
basis by comparing the ninety-day
volume-weighted average price to the
stock price goal
Operational goals are disregarded and
all tranches for which stock price goals
have been attained as of the date of
termination vest; next unattained
tranche will partially vest on a prorated
basis by comparing the ninety-day
volume-weighted average price to the
stock price goal
Change in Control Without
Termination
Stock price goals are compared against
the greater of closing price immediately
prior to Closing Date and per share
stock price received by stockholders in
such change in control; tranches
qualifying as “CIC Units” for which
the minimum service date has occurred
will vest; CIC Units for which the
minimum service date has not yet
occurred remain outstanding and
eligible to vest based on attainment of
minimum service requirements;
operational goals are disregarded
Stock price goals are compared against
the greater of closing price immediately
prior to Closing Date and per share
stock price received by stockholders in
such change in control; tranches
qualifying as “CIC Units” for which
the minimum service date has occurred
will vest; CIC Units for which the
minimum service date has not yet
occurred remain outstanding and
eligible to vest based on attainment of
minimum service requirements;
operational goals are disregarded
Termination By Executive Within 24
Months Following a Change
in Control For Good Reason or By the
Company Without Cause
Any “CIC Unit” tranches of the CEO
Performance Award that are unvested
as of the date of termination
immediately vest
Any “CIC Unit” tranches of the 2024
Employee XSP that are unvested as of
the date of termination immediately
vest
Death or Disability
Minimum service date requirements
are disregarded and any tranches for
which stock price goals and operational
goals have been achieved as of the date
of termination immediately vest
Minimum service date requirements
are disregarded and any tranches for
which stock price goals and operational
goals have been achieved as of the date
of termination immediately vest
Axon Enterprise, Inc. | 2025 Proxy Statement | 52
The table below reflects the cash severance, equity acceleration and continuation of employee benefits that would be
provided to each of the NEOs assuming the notice of intent to terminate such executive’s employment occurred on
December 31, 2024. The following table excludes the deferred compensation amounts that would also be payable to Mr.
Isner or Ms. Bagley (see “Executive Compensation—2024 Nonqualified Deferred Compensation”).
Voluntary
Termination
By Executive
Termination
for Cause
Termination
without
Cause(1)
Change in
Control(2)
Death or
Disability
Patrick Smith
$
— $
— $ 275,006,128 $
— $ 115,315,910
Joshua Isner
$
— $
— $ 213,275,536 $ 41,173,559 $ 121,121,372
Brittany Bagley
$
— $
— $ 107,631,783 $ 31,701,611 $ 67,327,725
Jeffrey Kunins
$
— $
— $ 68,640,879 $ 20,334,720 $ 44,291,265
Cameron Brooks
$
— $
— $ 52,828,270 $ 14,560,093 $ 33,338,752
(1) Severance amounts based on annual bonus are calculated based on 2025 target bonus amounts.
(2) This includes a termination within 24 months following a Change in Control (a) by the NEO for Good Reason or
(b) by the Company without Cause. Assumes that the relevant Change in Control and termination occur on
December 31, 2024, and that no tranches of 2024 Employee XSP and 2024 CEO Performance Award are
determined to be "CIC Units" as defined in the applicable plans.
The value of time-based RSUs reflected in amounts above is equal to the most available closing market price of a share of
the Company’s common stock as of December 31, 2024 ($594.32), multiplied by the number of units that would vest.
Axon Enterprise, Inc. | 2025 Proxy Statement | 53
PAY VERSUS PERFORMANCE
As required by Section 953(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(v) of
Regulation S-K under the Exchange Act, we are providing the following information about the relationship between
executive compensation actually paid and the financial performance of our Company. The following table sets forth the
compensation for our CEO or principal executive officer (“PEO”) and the average compensation for our other NEOs. For
further information concerning our compensation philosophy and how we align executive compensation with our
performance, see “Executive Compensation—Compensation Discussion and Analysis.”
Value of Initial $100
Investment Based on
Year
Summary
Compensation
Table Total for
PEO(1)
Compensation
Actually Paid
to PEO (2) (3)
Average Summary
Compensation
Table Total for
Non-PEO NEOs (1)
Average
Compensation
Actually Paid to
Non-PEO NEOs (2) (3)
Total
Shareholder
Return
Peer Group
Total
Shareholder
Return (4)
Net Income (loss)
(in thousands) (6)
Adjusted
EBITDA (5) (6)
(in thousands)
2024
164,525,721
385,171,518
61,434,191
151,439,028
$
811.03
$
215.22
$
377,034
$
521,375
2023
40,058
43,533,121
17,716,938
28,506,155
352.52
167.30
175,783
331,396
2022
33,203
13,687,307
4,305,869
2,091,584
226.43
116.65
146,930
232,033
2021
33,115
253,610,579
5,634,227
30,194,861
214.25
174.36
(56,339)
183,086
2020
2,559,392
278,740,704
1,914,694
31,929,509
167.21
143.64
(1,724)
155,808
(1)
For each year presented, Patrick Smith was our PEO; reflects amounts reported in the Summary Compensation
Table for the respective years. Our non-PEO NEOs for 2024 were Ms. Bagley and Messrs. Isner, Kunins and
Brooks. Our non-PEO NEOs for 2023 were Ms. Bagley and Messrs. Isner and Kunins. Our non-PEO NEOs for
2022 were Ms. Bagley and Messrs. Isner, Kunins, Larson, Ahsan and Zito. Our non-PEO NEOs for 2021 were
Messrs. Larson, Ahsan, Isner and Kunins. Average compensation for the non-PEO NEOs reflects amounts
reported in the Summary Compensation Table for the respective years.
(2)
Amounts shown for compensation actually paid (“CAP”) are computed in accordance with Item 402(v) of
Regulation S-K under the Exchange Act and do not reflect the actual amount of compensation earned by or paid to
the NEOs during the applicable year. These amounts reflect total compensation as reported in the Summary
Compensation Table with certain adjustments as required by Item 402(v) of Regulation S-K as described in Note
(3) below.
(3)
CAP reflects the exclusions and inclusions of equity awards for the PEO and the other NEOs as set forth below
and calculated in accordance with ASC Topic 718. The valuation methodologies and assumptions used to
calculate CAP are based on the grant date fair value of these awards as disclosed in the Company’s consolidated
financial statements filed with the SEC on Annual Report on Form 10-K for each of the years reflected in the table
below:
Axon Enterprise, Inc. | 2025 Proxy Statement | 54
Summary Compensation Table Total to CAP Reconciliation for the PEO and the other NEOs for 2024:
Calculation of Compensation Actually Paid
Calculation for
PEO
Calculation for Average
of Non-PEOs
Summary Compensation Table Total
$
164,525,721
$
61,434,191
Less grant date fair value of stock and option awards reflected in Summary Compensation
Table
(164,463,091)
(60,304,351)
Add year-end fair value of awards granted during the fiscal year that are outstanding and
unvested as of the end of the fiscal year
385,108,888
136,208,029
Add change in fair value (whether positive or negative) as of fiscal year-end for outstanding
and unvested awards granted in prior fiscal years
—
12,407,187
Add fair value as of vesting date of awards granted during the fiscal year which vested in
the same fiscal year
—
1,389,844
Add change in fair value (whether positive or negative) as of vesting date of awards granted
in prior fiscal years for which all applicable vesting conditions were satisfied during the
fiscal year
—
3,872,117
Subtract the fair value as of prior fiscal year-end for awards granted in prior years that
failed to meet the applicable vesting conditions during the fiscal year
—
(3,567,989)
Compensation Actually Paid
$
385,171,518
$
151,439,028
For purposes of the above adjustments, the fair value of the equity awards on the applicable date was determined in
accordance with FASB ASC Topic 718, using valuation methodologies that are generally consistent with those used to
determine the grant date fair value for accounting purposes.
(4)
Total Shareholder Return (“TSR”) shown in this table utilizes the NASDAQ Composite Index that we use in the
stock performance graph required by Item 201(e) of Regulation S-K included in the Company’s consolidated
financial statements filed with the SEC in our 2024 Annual Report. The comparison assumes $100 was invested
for the period starting December 31, 2019 through December 31 of the applicable fiscal year in each of the
Company’s common stock and the NASDAQ Composite Index. All dollar values assume reinvestment of the pre-
tax value of dividends paid by companies included in the NASDAQ Composite Index. The historical stock price
performance of our common stock shown is not necessarily indicative of future stock price performance.
(5)
Pursuant to Item 402(v) of Regulation S-K under the Exchange Act, we determined Adjusted EBITDA to be the
most important financial performance measure used to link Company performance to CAP for our PEO and our
other NEOs in 2024 and 2023. This performance measure may not have been the most important financial
performance measure for years 2022 and 2021 and we may determine a different financial performance measure
to be the most important such measure in future years. Adjusted EBITDA is defined as 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; transaction and
integration costs related to strategic investments and acquisitions including adjustments related to the foreign
currency impact of acquired intercompany balances that were unsettled as of the reporting date and plan to be
settled in the near term; 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. For a reconciliation of Adjusted EBITDA to earnings, see “Reconciliation to Non-GAAP
Measures.”
(6)
Refer to “Executive Compensation—Compensation Discussion and Analysis—Clawback Policy” for additional
details relating to the Revision and the resulting impacts on Revenue and Adjusted EBITDA. As such, Revenue
and Adjusted EBITDA for 2021 and subsequent periods have been revised accordingly.
Axon Enterprise, Inc. | 2025 Proxy Statement | 55
Pay Versus Performance Relationship Descriptions:
Figure 1: Relationship between Axon’s CAP for PEO and NEOs (Average) vs. cumulative TSR of Axon and the peer
group
Axon Enterprise, Inc. | 2025 Proxy Statement | 56
Figure 2: Relationship between Axon’s CAP for PEO and NEOs (Average) vs. Axon’s net income
Figure 3: Relationship between Axon’s CAP for PEO and NEOs (Average) vs. Adjusted EBITDA
Axon Enterprise, Inc. | 2025 Proxy Statement | 57
Between 2020 and 2024, we experienced record stock price appreciation and operating performance, which led to
appreciation in the value of our 2018 CEO Performance Award and XSU awards granted under our 2019 XSPP, our 2024
Employee XSP and our 2024 CEO Performance Award.
Set forth below is a list of the three most important financial performance measures used to link executive compensation
actually paid to our NEOs during 2024 to Company performance:
•
Adjusted EBITDA;
•
Revenue; and
•
Company stock price.
Axon Enterprise, Inc. | 2025 Proxy Statement | 58
PAY RATIO OF CEO COMPENSATION
TO MEDIAN EMPLOYEE COMPENSATION
The Company designs its compensation programs to be fair, equitable, globally compliant and aligned with our business
objectives. Our CEO, Patrick Smith, has agreed to performance-based compensation arrangements in the form of the 2018
CEO Performance Award and 2024 CEO Performance Award, and as described elsewhere in this proxy statement, Mr.
Smith does not receive significant compensation or benefits other than these performance-based awards. We are providing
a ratio of (i) Mr. Smith’s 2024 annual total compensation to (ii) the median of the 2024 annual total compensation of all
Axon employees other than Mr. Smith, calculated pursuant to the disclosure requirements of the Summary Compensation
Table above as if the median compensated employee was a named executive officer. Because of the treatment of the 2018
CEO Performance Award and 2024 CEO Performance Award as compensation for Mr. Smith in 2018 and in 2024,
respectively, for purposes of the Summary Compensation Table, there may be a significant disconnect between what is
reported as compensation for Mr. Smith in a given year in the Summary Compensation Table and the value actually
realized as compensation in that year or over a period of time. See “Executive Compensation—Compensation Discussion
and Analysis—Components of Executive Compensation—Long-Term Performance-Based Equity Compensation—2018
CEO Performance Award” and “Executive Compensation—Compensation Discussion and Analysis—Components of
Executive Compensation—Long-Term Performance-Based Equity Compensation—2024 CEO Performance Award”.
Mr. Smith’s annual total compensation, as reported in the Summary Compensation Table above, was $164,525,721 for
2024, and the median 2024 annual total compensation of all other employees was $205,322. Consequently, the applicable
ratio of such amounts for 2024 was 801:1.
Our methodology for identifying the median of the 2024 annual total compensation for each of our employees other than
Mr. Smith was as follows:
• We determined that, as of December 31, 2024, Axon and all of our subsidiaries had 4,440 qualifying individuals
(full-time, part-time, and temporary employees other than Mr. Smith), of which 17% were based outside of the
United States and 15% were production-line employees.
• We did not include in the population of qualifying individuals any employees of staffing agencies whose
compensation is determined by those agencies.
• We applied the requirements and assumptions required for the Summary Compensation Table for each such
individual as if he or she was a named executive officer to calculate total annual compensation, including base
salary or wages, performance-based commission payments, and equity awards based on their grant date fair
values.
• We converted any payment earned or paid in a foreign currency to U.S. dollars using the average of the prevailing
conversion rates for 2024.
• We selected the median of all total annual compensation amounts calculated in accordance with the foregoing.
The SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s
annual total compensation allow companies to adopt a variety of methodologies, exclusions and assumptions that reflect
their compensation practices. As such, the pay ratio reported above may not be comparable to the pay ratio reported by
other companies, even those in a related industry or of a similar size and scope. Other companies may have different
employment practices, regional demographics or may utilize different methodologies, exclusions and assumptions in
calculating their pay ratios.
Axon Enterprise, Inc. | 2025 Proxy Statement | 59
AUDIT MATTERS
REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board of Directors reviews the Company’s financial reporting process on behalf of the Board.
The Audit Committee has sole authority to retain, set compensation and retention terms for, terminate, oversee and evaluate
the work of the Company’s independent registered public accounting firm (the “independent auditor”). The independent
auditor reports directly to the Audit Committee.
The Company’s management is responsible for the Company’s financial reporting process, including its system of internal
controls, and for the preparation of consolidated financial statements in accordance with accounting principles generally
accepted in the United States. PricewaterhouseCoopers LLP, the Company’s independent auditor, is responsible for
expressing an opinion based on its audits of the consolidated financial statements and for performing an independent audit
of our internal control over financial reporting and expressing an opinion thereon.
In accordance with its written charter, the Audit Committee assists the Board of Directors in fulfilling its oversight
responsibilities regarding (i) the Company’s process for financial reporting and the integrity of the Company’s financial
statements; (ii) the Company’s internal control system; (iii) the performance of the Company’s internal audit function; (iv)
the independent auditor’s independence, qualifications and performance; (v) the Company’s risk assessment and
management policies for major financial risks; and (vi) the Company’s Code of Business Conduct and Ethics and process
for monitoring compliance with laws and regulations.
Further, the Audit Committee reviews reports prepared by management on various matters, including critical accounting
policies and issues, material written communications between the independent auditor and management, significant
changes in the Company’s selection or application of accounting principles and significant changes to internal control
procedures. It is not the duty or responsibility of the Audit Committee to conduct auditing and accounting reviews or
procedures.
In discharging its oversight responsibilities with respect to the audit process, the Audit Committee (i) obtained from the
independent auditor a formal written statement describing all relationships between the independent auditor and the
Company that might bear on the independent auditor’s independence consistent with the applicable requirements of the
Public Company Accounting Oversight Board (“PCAOB”), (ii) discussed with the independent auditor any relationships
that may impact its objectivity and independence, and (iii) considered whether any non-audit services provided to the
Company by PricewaterhouseCoopers LLP are compatible with maintaining its independence. The Audit Committee also
discussed with the independent auditor its identification of audit risk, audit plans and audit scope, as well as all
communications required by generally accepted auditing standards, including those described in Auditing Standard No.
1301, “Communications with Audit Committees” issued by the PCAOB.
The Audit Committee reviewed and discussed with management and its independent auditor the Company’s audited
consolidated financial statements and its internal control over financial reporting.
During 2024, the Audit Committee met with representatives of the independent auditor, both with management present and
in private sessions without management present, to discuss the results of the financial statement audit and quarterly reviews
and to solicit its evaluation of the Company’s accounting principles, practices and judgments applied by management and
the quality and adequacy of the Company’s internal controls.
In performing the above described functions, the Audit Committee acts only in an oversight capacity and necessarily relies
on the work and assurances of the Company’s management and independent auditor, which, in the independent auditor’s
report, expresses an opinion on the conformity of the Company’s consolidated financial statements to accounting principles
generally accepted in the United States.
Based upon the Audit Committee’s discussion with the Company’s management and PricewaterhouseCoopers LLP, and
the Audit Committee’s review of the representations of the Company’s management and the report of the independent
Axon Enterprise, Inc. | 2025 Proxy Statement | 60
auditor to the Audit Committee, the Audit Committee recommended to the Board that the audited consolidated financial
statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024.
The Audit Committee:
Graham Smith, Chair
Julie Anne Cullivan
Michael Garnreiter
Caitlin Kalinowski
Jeri Williams
The foregoing Report of the Audit Committee does not constitute soliciting material and will not be deemed to be filed or
incorporated by reference by any general statement incorporating by reference this proxy statement into any other
Company filing under the Securities Act or Exchange Act, except to the extent the Company specifically incorporates this
Report by express reference therein.
Axon Enterprise, Inc. | 2025 Proxy Statement | 61
PROPOSALS
Overview of Proposals
This proxy statement contains three proposals requiring shareholder action.
•
Proposal No. 1 requests the election of the 10 directors of the Company named in this proxy statement for a term
of one year and until their successors are elected and qualified.
•
Proposal No. 2 requests that shareholders vote to approve, on an advisory basis, the compensation of the
Company’s named executive officers.
•
Proposal No. 3 requests the ratification of the appointment of PricewaterhouseCoopers LLP as the Company’s
independent registered public accounting firm for fiscal year 2025.
Each proposal is discussed in more detail below.
Axon Enterprise, Inc. | 2025 Proxy Statement | 62
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
The Board is elected by and accountable to the shareholders to oversee their interest in the long-term health and the overall
success of the Company’s business and its financial strength. The Board serves as the ultimate decision-making body of the
Company except for those matters reserved to, or shared with, the shareholders. The Board selects and oversees the
members of senior management, who are charged by the Board with conducting the business of the Company.
Election Process
The Board has nominated for election the following 10 nominees: Erika Ayers Badan, Adriane Brown, Julie Cullivan,
Michael Garnreiter, Caitlin Kalinowski, Matthew McBrady, Hadi Partovi, Graham Smith, Patrick Smith and Jeri Williams.
The Board has no reason to believe that any of the nominees will be unwilling or unable to serve if elected a director. If any
nominee is unable or unwilling to serve as a director at the date of the Annual Meeting or any postponement or
adjournment thereof, the proxies may be voted for a substitute nominee, as designated by the Board to fill such vacancy.
Unless otherwise instructed, all proxies received will be voted FOR the election of each of the nominees.
The Board of Directors recommends a vote FOR the election of Erika Ayers Badan, Adriane Brown, Julie Cullivan,
Michael Garnreiter, Caitlin Kalinowski, Matthew McBrady, Hadi Partovi, Graham Smith, Patrick Smith and Jeri
Williams.
Vote Required
For Proposal No. 1, under our Bylaws, assuming the existence of a quorum at the Annual Meeting, each director will be
elected by the affirmative vote of a majority of votes properly cast for and against such nominee’s election. Abstentions
and broker non-votes will be counted toward a quorum, but will not affect the outcome of the vote on the election of
directors.
Axon Enterprise, Inc. | 2025 Proxy Statement | 63
PROPOSAL NO. 2 – ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY’S
NAMED EXECUTIVE OFFICERS
Shareholders will be given the opportunity to vote on the following advisory resolution (commonly referred to as “say on
pay”):
RESOLVED, that the shareholders of Axon Enterprise, Inc. hereby approve the compensation paid to the Company’s
NEOs, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis,
compensation tables and narrative discussion set forth in this proxy statement.
Background on Proposal
In accordance with the requirements of Section 14A of the Exchange Act and related SEC rules, shareholders are being
given the opportunity to vote at the Annual Meeting on this advisory resolution regarding the compensation of our NEOs.
As described in the Compensation Discussion and Analysis, our executive compensation program is designed to allow us
to attract and retain market competitive talent, link annual incentive compensation to our financial results produced during
the year, and link long term compensation in the form of stock awards to Company performance and enhancement of
shareholder value over time. For a comprehensive description of our executive compensation program, philosophy and
objectives, including the specific components of executive compensation that comprised the program in 2024, please refer
to “Executive Compensation—Compensation Discussion and Analysis.” The 2024 Summary Compensation Table and
other executive compensation tables (and accompanying narrative disclosures) provide additional information about the
compensation that we paid to our NEOs in 2024.
At our 2023 Annual Meeting of Shareholders, the shareholders indicated, on an advisory vote basis, that they preferred that
we hold say-on-pay votes on an annual basis (a frequency vote is required to be held at least once every six years). In light
of these results, the Company’s Board of Directors decided to hold its future advisory votes on the compensation of named
executive officers annually.
Effects of Advisory Vote
Because the vote on this proposal is advisory in nature, it will not affect any compensation already paid or awarded to our
NEOs and will not be binding on the Board or the Compensation Committee. However, the Compensation Committee will
consider the outcome of the vote when making future executive compensation decisions.
Overview and Summary; Consideration of Prior Year Say-on-Pay Vote
The Company believes in competitive compensation aligned with the values, objectives and financial performance of the
Company. Since 2018, a significant amount of our executives’ potential total compensation has been tied to performance.
The Compensation Committee considers the performance criteria for the Company’s performance-based compensation
challenging but achievable. Performance-based RSUs, cash incentive compensation program, and commission targets have
been achieved during 2019, 2020, 2021, 2022, 2023 and 2024. Following the full vesting of all tranches under the 2018
CEO Performance Award and the 2019 XSPP, with the adoption of the 2024 CEO Performance Award and 2024 Employee
XSP, compensation remains aligned with long-term Company performance.
At the 2024 Annual Meeting, we presented to shareholders, for advisory approval, the Company’s executive compensation
for 2023 (“Say-on-Pay Proposal”). Of the 60.3 million votes cast on the Say-on-Pay Proposal (including abstentions), over
50% were favorable for our Say-on-Pay Proposal. The Compensation Committee considered this a favorable outcome and
believed it conveyed our shareholders’ support of the Compensation Committee’s decisions and existing executive
compensation programs.
Our compensation opportunities for our named executive officers are predominantly delivered in the form of performance-
based awards, including equity-based awards, which are designed to promote incentives that are aligned with long-term
shareholder interests. It is the Compensation Committee’s intent that the total compensation for our NEOs be competitive
to attract and retain highly qualified individuals who are capable of making significant contributions critical to our long-
term success.
The Compensation Committee will continue to consider the results from this year’s and future advisory votes on executive
compensation.
Axon Enterprise, Inc. | 2025 Proxy Statement | 64
Unless otherwise instructed, all proxies received will be voted FOR approval of the advisory vote on executive
compensation.
The Board of Directors unanimously recommends a vote FOR approval of the resolution set forth above approving
the compensation of our named executive officers.
Vote Required
For Proposal No. 2, assuming the existence of a quorum at the Annual Meeting, the affirmative vote of a majority of the
total votes properly cast for or against the proposal in person or by proxy at the Annual Meeting is required for approval,
on an advisory basis. Abstentions and broker non-votes will have no impact on this proposal if a quorum is present.
Axon Enterprise, Inc. | 2025 Proxy Statement | 65
PROPOSAL NO. 3 - RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
The Audit Committee has appointed PricewaterhouseCoopers LLP, independent registered public accounting firm, to audit
the consolidated financial statements of the Company for the year ending December 31, 2025. PricewaterhouseCoopers
LLP has served as the independent registered public accounting firm for the Company since 2024. A representative from
PricewaterhouseCoopers LLP is expected to be present at the Annual Meeting and will have the opportunity to make a
statement and is expected to be available to respond to appropriate questions.
Change in Independent Registered Public Accounting Firm
Grant Thornton LLP (“Grant Thornton”) served as our independent registered public accounting firm from 2005 through
2024. On February 26, 2024, following the conclusion of a process managed by the Audit Committee, the Audit
Committee approved the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm, effective following the filing of the 2023 Annual Report. The Audit Committee views periodic auditor
rotation, particularly after a long tenure, as a good governance practice that supports auditor independence.
During the Company’s year ended December 31, 2023 and through February 26, 2024, neither the Company, nor anyone
on its behalf, consulted PricewaterhouseCoopers LLP regarding either: (i) the application of accounting principles to a
specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company’s
financial statements, and neither a written report nor oral advice was provided to the Company that
PricewaterhouseCoopers LLP concluded was an important factor considered by the Company in reaching a decision as to
any accounting, auditing, or financial reporting issue; or (ii) any matter that was the subject of a “disagreement,” within the
meaning of Item 304(a)(1)(iv) of Regulation S-K promulgated under the Exchange Act and the related instructions thereto
(“Regulation S-K”), or “reportable event,” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
In connection with the appointment of PricewaterhouseCoopers LLP, on February 26, 2024, the Audit Committee
approved the dismissal of Grant Thornton LLP as the Company’s independent registered public accounting firm, effective
immediately following completion of their engagement for the year ended December 31, 2023.
The appointment of PricewaterhouseCoopers LLP did not affect Grant Thornton’s engagement for the year ended
December 31, 2023.
During the year ended December 31, 2023 and the subsequent interim period through February 26, 2024, there were no: (1)
“disagreements,” within the meaning of Item 304(a)(1)(iv) of Regulation S-K, between the Company and Grant Thornton
on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which
disagreements, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference to
the subject matter of the disagreement in connection with its report on the Company’s consolidated financial statements, or
(2) “reportable events,” within the meaning of Item 304(a)(1)(v) of Regulation S-K.
The audit report of Grant Thornton on the Company’s consolidated financial statements as of and for the year ended
December 31, 2023 did not contain an adverse opinion or a disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles.
Shareholder ratification of the selection of PricewaterhouseCoopers LLP as our independent registered public accounting
firm is not required by our Bylaws or otherwise. Nonetheless, the Board, upon the recommendation of the Audit
Committee, is submitting the selection of PricewaterhouseCoopers LLP to the shareholders for ratification as a matter of
good corporate practice and because the Board and the Audit Committee value the views of our shareholders on our
independent auditors.
Even if the selection is ratified, the Audit Committee, in its discretion, may appoint a different independent registered
public accounting firm at any time during the year if it determines that such an appointment would be in the Company’s
best interest.
If the appointment is not approved by the shareholders, the adverse vote will be considered a direction to the Audit
Committee to consider other auditors for next year. However, because of the difficulty in making any substitution of
Axon Enterprise, Inc. | 2025 Proxy Statement | 66
auditors so long after the beginning of the current year, the appointment in 2025 will stand, unless the Audit Committee
finds other good reason for making a change.
Audit and Non-Audit Fees
The following table presents fees for audit, tax and other professional services rendered by PricewaterhouseCoopers LLP
for the year ended December 31, 2024 and by Grant Thornton for the year ended December 31, 2023.
2024
2023
Audit fees (1)
$
3,963,000 $
2,065,500
Audit-Related Fees (2)
145,000
—
Tax Fees (3)
—
—
All Other Fees (4)
2,000
—
$
4,110,000 $
2,065,500
______________________________________
(1)
Audit Fees: Consists of fees billed for professional services rendered for the audit or review of Axon Enterprise, Inc.’s
consolidated financial statements, fees billed related to Sarbanes-Oxley 404 review and services provided by
PricewaterhouseCoopers LLP for the year ended December 31, 2024 and Grant Thornton LLP for the year ended
December 31, 2023 in connection with regulatory filings.
(2)
Audit-Related Fees: Consists of internal control and system review procedures for periods prior to a system upgrade.
No such services were rendered during the year ended December 31, 2023.
(3)
Tax Fees: Consists of fees billed principally for services provided in connection with worldwide tax consulting and
planning services. No such services were rendered during the years ended December 31, 2024 or 2023.
(4)
All Other Fees: Consists of licenses for disclosure software. No such services were rendered during the year ended
December 31, 2023.
Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditor
Consistent with SEC policies regarding auditor independence, the Audit Committee must pre-approve all audit and
permissible non-audit services provided by our independent auditors. Our Non-Audit Services Pre-Approval Policy covers
all services to be performed by our independent auditors. The policy contemplates a general pre-approval for all audit,
audit-related, tax and all other services that are permissible, with a general pre-approval period of twelve months from the
date of each pre-approval. Any other proposed services that are to be performed by our independent auditors, not covered
by or exceeding the pre-approved levels or amounts, must be specifically approved in advance.
The Audit Committee has considered and concluded that the provision by PricewaterhouseCoopers LLP of non-audit
services is compatible with PricewaterhouseCoopers LLP maintaining its independence.
Unless otherwise instructed, all proxies received will be voted FOR ratification of the appointment of
PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2025.
The Board of Directors recommends a vote FOR ratification of the appointment of PricewaterhouseCoopers LLP as
the Company’s independent registered public accounting firm for fiscal year 2025.
Vote Required
For Proposal No. 3, assuming the existence of a quorum at the Annual Meeting, the affirmative vote of a majority of the
total votes properly cast for or against the proposal in person or by proxy at the Annual Meeting is required for ratification.
Abstentions will have no impact on this proposal if a quorum is present.
Axon Enterprise, Inc. | 2025 Proxy Statement | 67
OTHER MATTERS
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this proxy statement that are not historical are “forward-looking statements” within the meaning of
Section 27A of the Securities Act and Section 21E of 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,” “estimate,” “project,” “plan,” “potential,” “continue,” “future,” “intend,” “expect,” “anticipate,” “believe,” “would,”
“should,” “could” and similar expressions are intended to 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. 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. Important factors that could cause actual results
to differ materially from those indicated by such forward-looking statements include those set forth in Axon’s filings with
the SEC, including the 2024 Annual Report, which accompanies this proxy statement. 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 SEC. Our filings with the SEC may be accessed at the
SEC’s web site at www.sec.gov.
SHAREHOLDER PROPOSALS
To be eligible for inclusion in the Company’s proxy materials for the 2026 Annual Meeting of Shareholders, a proposal
intended to be presented by a shareholder for action at that meeting must, in addition to complying with the shareholder
eligibility and other requirements of the SEC’s rules governing such proposals, be received not later than December 17,
2025 by the Corporate Secretary of the Company at the Company’s principal executive offices, 17800 North 85th Street,
Scottsdale, Arizona 85255.
Shareholders may bring business before an annual meeting of shareholders that is not submitted for inclusion in the
Company’s proxy materials pursuant to the process set forth above (including the nomination of any person to be elected as
a director) only if the shareholder proceeds in compliance with the Company’s Bylaws. For business to be properly brought
before an annual meeting of shareholders by a shareholder that is not submitted for inclusion in the Company’s proxy
materials (including the nomination of any person to be elected as a director), shareholders are advised to review the
Company’s Bylaws as they contain requirements with respect to advance notice of proposed business. To be timely, in
accordance with the Company’s Bylaws, notice must be delivered to the Corporate Secretary of the Company in proper
written form not less than 90 days nor more than 120 days prior to the first anniversary of the preceding year’s annual
meeting. Accordingly, any such shareholder proposal or director nomination must be received between January 29, 2026
and February 28, 2026 for the 2026 Annual Meeting of Shareholders. In the event that the date of the 2026 Annual Meeting
of Shareholders is more than 30 days before or more than 60 days after May 29, 2025, notice by the shareholder, to be
timely, must be so delivered no later than the close of business on the 90th day prior to the date of the 2026 Annual
Meeting of Shareholders and the 10th day following the day on which public announcement of the date of the 2026 Annual
Meeting of Shareholders is first made by the Company. In addition to satisfying the foregoing advance notice deadlines and
information requirements set forth in the Company’s Bylaws, any shareholder intending to submit a nomination for director
to the Board other than the Company’s nominees must comply with the additional requirements prescribed by Rule 14a-19
under the Exchange Act.
Axon Enterprise, Inc. | 2025 Proxy Statement | 68
The presiding officer at any annual meeting will determine whether any matter was properly brought before the meeting in
accordance with the above provisions. If the presiding officer should determine that any matter has not been properly
brought before the meeting, he or she will so declare at the meeting and any such matter will not be considered or acted
upon.
HOUSEHOLDING OF ANNUAL MEETING MATERIALS
Some brokers and other nominee record holders may be participating in the practice of “householding” proxy statements
and annual reports. This means that only one copy of this proxy statement and 2024 Annual Report may have been sent to
multiple shareholders in a shareholder’s household. The Company will promptly deliver a separate copy of either document
to any shareholder who contacts the Company’s investor relations department at 17800 North 85th Street, Scottsdale,
Arizona 85255, phone number (480) 515-6330, requesting such copies. If a shareholder is receiving multiple copies of this
proxy statement and 2024 Annual Report at the shareholder’s household and would like to receive a single copy of the
proxy statement and annual report for a shareholder’s household in the future, shareholders should contact their broker,
other nominee record holder, or the Company’s investor relations department to request mailing of a single copy of the
proxy statement and annual report.
A copy of the Company’s 2024 Annual Report is available to shareholders without charge upon request to: Investor
Relations, Axon Enterprise, Inc., 17800 North 85th Street, Scottsdale, Arizona 85255.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY
MATERIALS FOR THE ANNUAL SHAREHOLDER MEETING TO BE HELD ON MAY 29, 2025
The proxy materials for the Company’s Annual Meeting of Shareholders, including the 2024 Annual Report and this proxy
statement, are available over the Internet by accessing the investor relations page of the Company’s website at http://
investor.axon.com. Other information on the Company’s website does not constitute part of the Company’s proxy
materials.
By Order of the Board of Directors,
/s/ ISAIAH FIELDS
Isaiah Fields
Corporate Secretary
April 16, 2025
Axon Enterprise, Inc. | 2025 Proxy Statement | 69
Reconciliation of Non-GAAP Measures
(in thousands)
To supplement our financial results presented in accordance with accounting principles generally accepted in the United
States (“GAAP”), we present the non-GAAP financial measures of EBITDA and Adjusted EBITDA as defined below.
Management uses these non-GAAP financial measures in making operating decisions, allocating financial resources and
evaluating our 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 are 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 and marketable securities; transaction and integration costs
related to strategic investments and acquisitions including adjustments related to the foreign currency impact of
acquired intercompany balances that were unsettled as of the reporting date and plan to be settled in the near term;
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 EBITDA margin (most comparable GAAP measure: Net income margin) – Adjusted EBITDA as a
percentage of Net sales. Adjusted EBITDA and Adjusted EBITDA margin reconcile to Net income and Net
income margin, respectively.
Axon Enterprise, Inc. | 2025 Proxy Statement | 70
Year Ended December 31,
2024
2023
2022
2021
2020
Net income
$ 377,034
$ 175,783
$ 146,930
$ (56,339)
$ (1,724)
Depreciation and amortization
56,815
32,638
24,381
18,694
12,475
Interest expense
7,098
6,995
488
28
55
Investment interest income
(43,693)
(49,107)
(4,782)
(1,511)
(4,086)
Provision for (benefit from) income taxes
4,470
(18,722)
49,308
(80,062)
(4,567)
EBITDA
$ 401,724
$ 147,587
$ 216,325
$ (119,190)
$
2,153
Non-GAAP adjustments:
Stock-based compensation expense
382,604
131,358
106,176
303,331
133,572
Unrealized (gain) loss on strategic investments
and marketable securities, net
(192,067)
41,785
(98,943)
(23,035)
(2,055)
Realized gain on previously held minority
interest, net
(91,150)
—
—
—
—
Transaction and integration costs related to
strategic investments and acquisitions
15,249
4,501
2,368
2,068
1,032
Loss on disposal, abandonment, and impairment
of property, equipment and intangible assets, net
—
317
5,562
238
2,042
Loss recoveries
—
(3,404)
—
—
—
Inventory step-up amortization
609
—
—
—
—
Litigation costs and related recoveries
1,761
241
545
741
19,064
Payroll taxes related to 2019 XSPP vesting and
2018 CEO Performance Award option exercises
2,645
9,011
—
18,933
—
Adjusted EBITDA
$ 521,375
$ 331,396
$ 232,033
$ 183,086
$ 155,808
Net sales
2,082,526
1,560,699
1,187,143
865,638
681,003
Net income as a percentage of net sales
18.1 %
11.3 %
12.4 %
(6.5) %
(0.3) %
Adjusted EBITDA margin (adjusted EBITDA as a
percentage of net sales)
25.0 %
21.2 %
19.5 %
21.2 %
22.9 %
Axon Enterprise, Inc. | 2025 Proxy Statement | 71
[This Page Intentionally Left Blank]
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark One)
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
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
(State or other jurisdiction of
incorporation or organization)
86-0741227
(I.R.S. Employer
Identification No.)
17800 North 85th Street
85255
Scottsdale, Arizona
(Zip Code)
(Address of principal executive offices)
Registrant’s telephone number, including area code:
(480) 991-0797
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of exchange on which registered
Common Stock, $0.00001 par value per share
AXON
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer
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As of June 30, 2024, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $21.8 billion based on the closing sale price
as reported on The NASDAQ Stock Market LLC.
The number of shares of the registrant’s common stock outstanding as of February 24, 2025 was 76,623,266
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the registrant’s definitive proxy statement for its 2025 Annual Meeting of Shareholders to be prepared and filed with the Securities and Exchange Commission not later
than 120 days after December 31, 2024 are incorporated by reference into Part III of this Form 10-K.
AXON ENTERPRISE, INC.
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2024
PART I
Page
Item 1.
Business
4
Item 1A. Risk Factors
13
Item 1B. Unresolved Staff Comments
38
Item 1C. Cybersecurity
38
Item 2.
Properties
41
Item 3.
Legal Proceedings
41
Item 4.
Mine Safety Disclosures
41
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
41
Item 6.
[Reserved]
42
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
56
Item 8.
Financial Statements and Supplementary Data
57
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
112
Item 9A. Controls and Procedures
112
Item 9B. Other Information
114
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspection
115
PART III
Item 10. Directors, Executive Officers and Corporate Governance
115
Item 11. Executive Compensation
115
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
115
Item 13. Certain Relationships and Related Transactions, and Director Independence
116
Item 14. Principal Accountant Fees and Services
116
PART IV
Item 15. Exhibits, Financial Statement Schedules
116
Item 16. Form 10-K Summary
118
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PART I
Statements contained in this Annual Report on Form 10-K that are not historical are “forward-looking statements”
within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations,
beliefs, intentions and strategies regarding the future. 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 Annual Report on Form 10-K 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 I, 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 Annual Report on
Form 10-K, 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.
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Item 1.
Business
Overview
Axon Enterprise, Inc. (“Axon,” the “Company,” “we” or “us”) is a technology leader in global public safety. In 2022,
we announced our moonshot goal 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 hardware and software solutions advance our mission to (i) make the bullet obsolete, (ii) reduce social conflict,
and (iii) enable a fair and effective justice system. Our products solve some of society's most challenging problems and our
mission attracts top talent. We aim to invent and deliver public safety products that progressively make the right things
easier and the wrong things harder every day.
Our research & development (“R&D”) investments support continuous innovation on behalf of our customers. Our
financial strategy is to build highly recurring, highly profitable businesses and to drive growth through this purposeful
product innovation.
Axon’s operations comprise two reportable segments:
1.
Software and Sensors: We develop, manufacture and sell fully integrated hardware and cloud-based
software solutions that enable law enforcement to capture, securely store, manage, share and analyze
video and other digital evidence. Our software offerings also support productivity and real-time
operations. The Software and Sensors segment includes the sale of sensors, including body cameras, in-
car cameras, other hardware sensors, warranties on sensors, and other products, as well as recurring
cloud-hosted software revenue, related non-recurring professional services revenue, and revenue from
certain software, including on-premise licenses.
2.
TASER: Axon is the market leader in the development, manufacture and sale of conducted energy
devices ("CEDs"), which we sell under our brand name, TASER. The TASER segment includes the
manufacture and sale of CEDs, batteries, accessories and extended warranties, digital subscription
training content, virtual reality ("VR") training content, TASER Evidence.com license revenue, and other
professional services tied to TASER and VR deployments.
For further information about our reportable segments and sales by geographic region, refer to Note 1 of Part II, Item
8 of this Annual Report on Form 10-K.
Axon employees are distributed across multiple geographies and report to work via a remote-hybrid model, which
leverages both in-person collaboration environments as well as cloud-based software tools that enable remote productivity.
Our headquarters in Scottsdale, Arizona and our hubs in Seattle, Washington; San Francisco, California; Boston,
Massachusetts; Atlanta, Georgia; and Sterling, Virginia house the majority of our in-person employees located in the
United States, including members of our executive management team, and sales, marketing, certain engineering,
manufacturing, finance and other administrative support functions. We also have subsidiaries and/or offices located in
Australia, Belgium, Canada, Finland, France, Germany, Greece, India, Italy, the Netherlands, Spain, the United Kingdom
and Vietnam.
Key Product Category Revenue Drivers: What We Offer
Axon products are generally cloud-connected, designed to drive better outcomes and customer experiences, and sold
via mutually reinforcing integrated subscription plans. Our key revenue drivers belong to three broad product categories:
•
Software: Axon is building a suite of cloud-based, Software-as-a-Service (“SaaS”) solutions that integrate
with our sensors and TASER devices to benefit customers and drive annual recurring revenue, which totaled
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$1.0 billion1 as of December 31, 2024. We have many SaaS solutions, which can best be trisected into three
categories: digital evidence management, productivity and real-time operations solutions. Axon Evidence is
the world’s largest cloud-hosted public safety data repository of public safety video data and other types of
digital evidence. Our productivity suite, which includes Axon Records and artificial intelligence ("AI"), is
designed to save officers time spent writing reports and doing paperwork. Our real-time operations
capabilities, which include Axon Respond, integrates location data, signal alerts and video feeds to provide a
complete picture of evolving situations.
•
Sensors: Axon devices address many needs, including transparency, real-time situational awareness, and
accurate capture and integration of evidence with software workflows. Product categories within sensors
include Axon Body cameras, Axon Fleet in-car systems, drones and robotics, and other devices that work
with our software. Our software solutions also support an open ecosystem of connected devices produced by
other vendors.
•
TASER: We develop smart devices, tools and services that support public safety officers in de-escalating
situations, avoiding or minimizing use of force and aiding consumer personal protection. These tools include
TASER devices, VR training services and consumer devices. Research has shown that TASER devices are
the most effective less-than-lethal force option, with the lowest likelihood of injury to officers and assailants.
Since our inception in 1993, TASER devices have been adopted by a majority of U.S. state and local law
enforcement and are used daily to help keep communities safe. Global adoption of TASER devices remains
early and we are expanding into new geographies. Axon VR solutions make public safety training more
accessible, relevant and affordable — with the goal of using new immersive VR technologies to better
prepare officers for real-life situations in the field.
Sales and Distribution: Who We Sell To and Where We Deliver
We think of our core customers as falling into roughly four categories of funding sources: U.S. state and local
governments, the U.S. federal government, international government customers and commercial enterprises. Additionally,
the types of customers who find value in our product offerings are expanding beyond law enforcement to include
customers such as attorneys, corrections, fire and emergency medical services personnel, commercial enterprise security,
frontline enterprise workers, and the U.S. military.
Axon’s sales force and strong customer relationships represent key strategic advantages. The majority of our revenues
are generated via direct sales, including our online store, although we do leverage distribution partners and third-party
resellers. No customer represented more than 10% of total net sales for the years ended December 31, 2024, 2023 or 2022.
As we diversify into new markets, we have been investing in sales personnel and strategic headcount additions to support
growth in these markets.
Governmental agencies generally have the ability to terminate our contracts, in whole or in part, for reasons including
non-appropriation of funds. We continue to monitor developments in federal government funding.
Resources
Manufacturing and Supply Chain
We perform light manufacturing, final assembly and final test operations at our facilities in Scottsdale, Arizona and
own substantially all of the equipment required to develop, prototype, manufacture and assemble our finished products. We
have continued to maintain both our ISO 9001 and our ISO 9001:2015 certifications.
We continue to take steps to diversify our supply chain and global manufacturing footprint, which positions us well to
manage supply chain disruptions. Material availability has mostly stabilized from prior supply chain challenges while
general levels of risk continue to exist in all businesses that manufacture products. Supplier decommitments remain a top
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1 Calculated as monthly recurring license, integration, warranty, and storage revenue for the year ended December 31,
2024. Annual recurring revenue is a forward-looking performance indicator that management believes provides more
visibility into the growth of our revenue generated by our highest margin, recurring services. Annual recurring revenue
should be viewed independently of revenue and deferred revenue because it is an operating measure and is not intended to
be combined with or to replace GAAP revenue or deferred revenue, as they can be impacted by contract start and end
dates and renewal rates. Annual recurring revenue is not intended to be a replacement or forecast of revenue or deferred
revenue.
area of risk. However, we have put programs in place to mitigate this risk. We proactively manage our supply chain down
to third tier suppliers to mitigate and overcome material shortages. These actions align to our strategic model to help meet
strong product demand while also preparing us to stagger factory work schedules as needed, which enables us to meet
compressed build schedules over short periods of time. We continue to adjust strategic inventory levels in both raw
materials and finished goods based on areas of risk to mitigate potential supply disruptions.
In light of our broad domestic and international supplier base, we are continuously monitoring our supply chain to
manage through potential impacts, identifying alternate shipping and logistic sources, and working with foreign regulators
to ensure that our suppliers can provide high quality parts. Despite past supply chain disruptions relating to material
shortages and port constraints, we remain focused on actively managing our supply chain by strengthening strategic
relationships, securing secondary and alternate sourcing, adjusting build plans, maintaining strategic inventory and utilizing
flexible logistics to support growing demand while minimizing customer disruptions.
Even as we continue to expand our second sourcing of materials across our supply chain, we still obtain some unique
components from single source suppliers. However, because we own substantially all of the injection molded component
tooling used in their production, we believe we could obtain alternative suppliers in most cases with varying levels of
interruption. In addition, we also have programs to hold additional raw materials (such as resins, battery components and
critical semiconductors) to mitigate supply interruptions and better manage costs. For additional discussion of sources and
availability of raw materials, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
We offer both limited and extended manufacturer’s warranties on our Axon devices and CEDs. For additional
information about our warranties, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
Intellectual Property
We protect our intellectual property with U.S. and foreign patents, U.S. and foreign trademark registrations, and U.S.
copyright registrations. Our patents and pending patent applications relate to technology used by us in connection with our
products. We also rely on international treaties, organizations and laws to protect our intellectual property. As of
December 31, 2024, we hold over 330 U.S. patents, over 150 U.S. registered trademarks, over 270 international patents and
over 460 international registered trademarks, as well as numerous pending patent and trademark applications.
We continuously assess whether and where to seek formal protection for particular innovations and technologies
based on such factors as the commercial significance to our operations and our competitors’ operations in particular
countries and regions, our strategic technology or product directions in different countries, and the degree to which
intellectual property laws exist and are meaningfully enforced in different jurisdictions. We have the exclusive rights to
many Internet domain names, primarily including “Axon.com,” “Evidence.com” and “TASER.com.” We also vigorously
protect our intellectual property, including our patents and trademarks against third-party infringement.
We also execute non-disclosure agreements with employees, consultants and key suppliers to help ensure the
confidentiality of our trade secrets.
Competition
Sensors — Connected Cameras and Digital Evidence Management Software: The body camera and in-car video/
automatic license plate readers industry is highly competitive. Our competition includes 10-8 Video, 365Labs, Axis
Communications AB, Digital Ally Inc., Duress, Getac Technology Corporation, Halo Body Cameras, Hikvision, Hytera,
IONODES, i-PRO, LensLock Inc., Motorola Solutions, M-View, Oracle, Patrol Eyes, Pinnacle Response, Pro-Vision,
Recoda, Reveal Media, Safe Fleet, Utility Associates, Versaterm Inc., WCCTV, Wolfcom Enterprises, Wrap Technologies
Inc. and Zepcam B.V., Applied Concepts Inc., Genetec Inc. and Insight LPR.
The market for software solutions to improve public safety agency workflows is both highly fragmented and highly
competitive. Our cloud-based digital evidence management system, Axon Evidence, competes with both cloud-based
platforms and on-premises based systems designed by third parties or developed internally by an agency's technology staff.
Our competition includes FileOnQ, FotoWare, Genetec Inc., IBM, i-PRO, Motorola Solutions, NICE, OpenText
Corporation, Oracle, QueTel Corporation, Revir Technologies, Utility Associates and Vidizmo, LLC, among others.
Key competitive factors in this product category include product performance, product features (including live-
streaming, GPS tracking and pre-event buffering), battery life, product quality and warranty, total cost of ownership, data
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security, data and information workflows, company reputation and financial strength, and customer satisfaction and
relationships.
Productivity and Real-Time Operations Software — Records Management System (“RMS”) and Axon Fusus: The
RMS vertical area is competitive and highly fragmented. We have identified more than 50 software providers, including
365Labs, Beacon Software Solutions Inc., Caliber Public Safety (parent, Harris Computer Systems), Central Square
Technologies (formerly Superion, TriTech and Aptean), CivicEye, Core Technology Corporation, CSI Technology Group,
EForce Software, Executive Information Services Inc., Hexagon AB, Kologik, LawSoft Inc., Mark43 Inc, Motorola
Solutions, Niche Technology Inc., Saab, SmartCop, SOMA Global, Sopra Steria, Southern Software, Sun Ridge Systems
Inc. and Tyler Technologies. In addition, not all law enforcement agencies use software for report writing — some still use
paper. We believe our network of camera sensors and digital evidence management platform give us a strategic advantage
in these product categories. Our Axon Fusus offering competes both with real-time operations platforms that ingest body
camera video feeds, like Genetec's Citigraf, Motorola’s CommandCentral Aware and Utility’s Strax Response, Flock
Safety’s FlockOS, Hitachi Vantara’s Visualization Platform, and MIDL Technology, as well as platforms that ingest video
feeds exclusively from surveillance cameras, like Hexagon's Connect, Live Earth and Spatialitics's GeoShield, among
others.
Draft One: The AI-enabled report narrative drafting space is relatively new but fast growing. We have identified a
few providers in this space, including Abel, Blueline AI, GovWorx, Karda Analytics, Mark43’s ReportAI, Policereports.ai,
and Truleo.
VR De-Escalation Training for Law Enforcement, Corrections and Private Security: Our VR Training platform
competes with several other companies in the space who offer simulation scenarios, including simulated training on the use
of both lethal and less-than-lethal alternatives. Our competition in this space includes Adaptive VR Ltd., Apex Officer,
Hologate GmbH, InVeris Training Solutions Inc., Laser Shot Inc., MILO, OperatorXR, Street Smarts VR, Ti Training
Corp, V-Armed, VirTra Inc. and Wrap Technologies, among others.
Key competitive factors in this product category include scale of content library, integration to additional sensors and
devices (e.g. haptic suit, TASER), ease of use, visual fidelity and realism, quality of immersion experience (enhanced by
capabilities such as eye tracking and speech recognition) and portability.
Axon Air: Our end-to-end drone management software platform competes with a select set of companies in the space
who offer drone programs and flight management software solutions. Our competition in this space includes Auterion Ltd.,
BRINC Drones’ LiveOps, Flock Safety’s Aerodome, Motorola Solutions’ CAPE, Paladin Drones’ Watchtower and Votix,
LLC, among others. Key competitive factors in this product category include integration and compatibility with various
drone hardware providers and other technology systems used by first responders (e.g., digital evidence management), drone
program management and real-time situational awareness capabilities, intuitiveness of the user interface, the level of
training and customer support provided (particularly for the drone-as-first-responder use case), the customization and
flexibility allowed by the platform to meet specific operational needs and requirements of different customers (e.g.,
customizable flight restrictions) and the autonomy capabilities provided by the platform (e.g., creation of autonomous
missions).
Our indoor tactical drone hardware platform, Sky-Hero, competes with a few other companies in the space, including
BRINC, Indoor Robotics, XTEND, and FLIR. Key competitive factors in this product category include variety and weight
limits of compatible payloads, battery life and associated flight range, maneuverability and size, autonomy and onboard
intelligence (including ability to navigate in GPS denied environments), sensor and imaging technology, durability and
robustness of the drone, cost and maintenance required, reliability and security of communication and control systems, the
simplicity of the drone piloting user interface and the training required to operate the drones.
Dedrone by Axon: The counter drone space is fast growing and very fragmented. Within it, Dedrone competes with
Advanced Protection Systems, Anduril, ApolloShield, ARTSys360, Aselsan, Belgian Advanced Technology Systems, Big
Bang Boom Solutions, Bligther Surveillance Systems, BlueHalo, BSS Holland, CACI, Cerbair, Chess Dynamics,
DEFSYS, Department 13, D-Fend, DroneDefence, Droneshield, Dynamite Global Strategies, DZYNE Technologies,
EDGE, EdgeSource, Elbit Systems, ELT Group, ESG, Fortem Technologies, FN Herstal, General Atomics, Gradiant,
Guardion, Havelsan, Hensoldt, Hertz New Technologies, IEC Infrared Systems, Indra, L3 Harris, Leidos, Leonardo DRS,
LiveLink Aerospace, Lockheed Martin, Marduk, MBDA, MC2 Technologies, Meteksan Savunma, Metis, MSI Defense
Systems, MyDefence, Northrop Grumman, NSO Group, Openworks, QinetiQ, Raytheon, Regulus, Rheinmetall, SAAB,
SAIC, SAMI Advanced Electronics, Securiton, Sensofusion, Sentrycs, Sentry View Systems, Skycope, Skylock, Skysafe,
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SNC, Sopra Steria, SRC, Teledyne FLIR, Terma, Thales, TRD Systems, UAVOS, Unifly, Vector Solutions, Vigilant
Drone Defense, Vorpal, Whitefox Defense, and Zen Technologies, among others.
Key competitive factors in this product category include the breadth and accuracy of detection sensors (e.g., pan-tilt-
zoom cameras, radar, and acoustic) and multi-sensor fusion approaches, the chosen methodology for radio frequency-based
detection (e.g., RF signature matching or RF demodulation), integration of detection platforms with robust mitigation
solutions (e.g., jammers, cyber-takeover, kinetic and high-energy), the capacity to improve detection through scale and
continuous exposure to diverse drone makes and models in areas of high drone activity (e.g., urban centers, active war
zones) and the seamless interoperability with existing security and defense ecosystems
TASER for Professional Users: Our CEDs compete with a variety of less-than-lethal alternatives to firearms,
including rubber bullets or rubber baton rounds, such as those made by Combined Systems, Inc.; pepper spray and pepper
spray projectiles, such as those made by Byrna Technologies Inc. (dba Fox Labs), SABRE Corporation and Mace Security
International, Inc.; traditional stun guns, such as those made by UZI and Jolt; hand-held remote restraint devices involving
a tether, such as those made by Wrap Technologies Inc.; laser dazzlers that cause temporary blindness, such as those made
by B.E. Meyers & Co., Inc.; stun grenades, such as those made by Combined Systems, Inc.; long-range acoustic devices,
such as those made by Genasys Inc.; and police batons and night sticks, such as those made by Monadnock and Armament
Systems and Procedures, Inc. TASER devices offer advanced technology, versatility, portability, effectiveness, built-in
accountability systems and low injury rates, which enable us to compete effectively against other less-than-lethal
alternatives. TASER devices also offer connectivity to our cloud network, which allows law enforcement agencies and
other professional users to more effectively manage their less-than-lethal programs and automate use-of-force reporting.
The key competitive factors in this product category include a device’s accuracy, effectiveness, reputation, safety,
cost, ease of use, and exceptional customer experience. The design maturity of the TASER platform, as well as our
development and sale of a multi-shot device, are also key competitive differentiators. We are aware of competitors
providing competing CED products primarily outside of the United States.
TASER for Personal Safety: In the private citizen space, TASER devices compete with firearms and other less-than-
lethal self-defense options such as stun guns and pepper spray-based products. Leading competitors in the less-than-lethal
space include Byrna Technologies, Inc., Mace, PepperBall, SABRE, Salt Supply Co. and Vipertek. The TASER
StrikeLight competes in the flashlight category, in which there are dozens, if not hundreds, of competitors, including
tactical flashlight providers with and without stun gun capabilities.
TASER Bolt and TASER Pulse are not stun guns, and have different capabilities, including neuromuscular
incapacitation functionality. The broader market for personal safety and home defense is far-reaching, and categories range
from threat detection and accountability (e.g., dash and doorbell cameras), to home security (e.g., home alarms, locks and
response services) to personal defense (e.g., firearms, stun guns, TASER devices, pepper spray, tactical flashlights and
personal alarms), to personal tracking and emergency notification mobile applications.
The primary benefit of TASER devices is in less-than-lethal incapacitation. Other competitive factors include a
device’s cost, effectiveness, safety, ease of use, and available training options.
Non-Axon trademarks are property of their respective owners.
Seasonality
Our business operations are influenced by municipal budget cycles. Additionally, new product introductions can
significantly impact the cadence of net sales, product costs and operating expenses. Municipal law enforcement budgets
tend to feature a mix of fiscal years that end in either June, September or December, while U.S. federal budget year end is
in September. However, historical seasonal patterns, municipal budgets or historical patterns of product introductions
should not be considered reliable indicators of our future net sales or financial performance.
Governmental Regulation
We are subject to a variety of laws and regulations in the United States and abroad that involve matters central to our
business, including laws and regulations related to: privacy and data protection, security, retention and deletion; rights of
publicity; content; intellectual property; regulation of certain of our CEDs as firearms; advertising; marketing; distribution;
electronic contracts and other communications; competition; consumer protection; telecommunications; product liability;
taxation; labor and employment; sustainability; economic or other trade prohibitions or sanctions; securities; and online
8
payment services. A number of federal and state legislative proposals in the United States could impose new obligations in
areas affecting our business. Foreign laws and regulations can impose different obligations or be more restrictive than those
in the United States.
These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties
in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the
application, interpretation, and enforcement of these laws and regulations are often uncertain and may be interpreted and
applied inconsistently from country to country and inconsistently with our current policies and practices. See “Item 1A.
Risk Factors – Legal and Compliance Risks” for additional details.
Radio Spectrum and Unmanned Aerial and Ground-Based Robotic Devices
Certain of our products utilize radio spectrum to provide wireless voice, data and video communications services. The
allocation of spectrum is regulated in the United States and other countries and limited spectrum space is allocated to
wireless services and specifically to public safety users. We manufacture and market products in spectrum bands already
made available by regulatory bodies. If current products do not comply with the regulations set forth by these regulatory
bodies, we may be unable to sell our products or could incur penalties. Our results could be negatively affected by the rules
and regulations adopted from time to time by the U.S. Federal Communications Commission (“FCC”), Innovation, Science
and Economic Development Canada, the European Union Directorate-General for Environment or regulatory bodies in
other countries. Regulatory changes in current spectrum bands may also require modifications to some of our products so
they can continue to be manufactured and marketed.
Axon body cameras, docks, Axon Fleet vehicle cameras and Axon Signal devices are subject to the FCC’s rules and
regulations in the United States, as well as rules and regulations as applicable outside of the United States. These
regulations affect our CEDs with Axon Signal technology, including the TASER 7 CED, Signal Performance Power
Magazine (“SPPM”), the TASER 10 CED, and future CEDs implementing wireless technology. Compliance with
government regulations could increase our operations and product costs and impact our future financial results.
Additionally, some of our products depend on drones or other unmanned aerial and ground-based systems that
operate on the radio spectrum. We have also recently started offering hardware sensors combined with software to detect,
identify, track and mitigate drones through our acquisition of Dedrone. The FCC, the Federal Aviation Administration and
other agencies at the federal, state and local levels (as well as in foreign jurisdictions) are beginning to address some of the
numerous certification, regulatory and legal challenges associated with drones, but a comprehensive set of standards and
enforcement procedures has yet to be developed. Changes to the regulation of drones or other unmanned aerial systems
may impact our future financial results.
Axon and TASER CEDs
For our CED products, we rely on the opinions of the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives
(“ATF”), including the determination that a device that does not expel projectiles by the action of an explosive is not
classified as a firearm. Changes in laws, regulations, and interpretations outside of our control may result in our products
being classified or reclassified as firearms. If this were to occur, our private citizen demand could be substantially reduced
because consumers would be required to comply with federal, state or local firearm transfer requirements prior to
purchasing our product. For additional details, see “Item 1A. Risk Factors – Legal and Compliance Risks.”
Federal regulation of sales in the United States: The majority of our currently offered CEDs are not classified as
firearms regulated by the ATF. However, the ATF regulates the TASER 10 CED as a firearm under the Gun Control Act of
1968 due to a technological advancement specific to the propulsion design of the TASER 10 CED cartridges. In the event
we make the TASER 10 CED available to our private citizen and enterprise customers, demand could be substantially
reduced as a result of this classification because non-governmental end-users would be required to comply with federal,
state or local firearm transfer requirements prior to purchasing the TASER 10 CED. In addition, the implications of such
classification on use-of-force standards and regulations could impact our ability to sell the TASER 10 CED to law
enforcement and government entities. Because Axon must maintain a federal firearms license to manufacture and sell the
TASER 10 CED, we are subject to periodic compliance inspections by the ATF. License violations discovered by the ATF
can result in fines, penalties, warning letters or license revocation, leading to disruptions in operations. Further, we are
required to administer, track and remit firearm and ammunition excise taxes as applicable.
Our CED products are also subject to testing, safety and other standards by organizations such as the American
National Standards Institute, the International Electrotechnical Commission, the National Institute of Standards and
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Technology and Underwriters Laboratories. These regulations also affect CEDs with Axon Signal technology, including
SPPM technology, and the TASER 7 and TASER 10 battery packs.
Federal regulation of international sales: Our CEDs are considered a “crime control” product by the U.S.
Department of Commerce (“DOC”) for export directly from the United States, which requires us to obtain an export license
from the DOC for the export of our CED devices from the United States to any country other than Canada. Future products
and services may require classifications from the DOC before they may be shipped internationally. Our inability to obtain
DOC export licenses or classifications on a timely basis for sales of our products and services to our international
customers could significantly and adversely affect our international sales. Although the TASER 10 CED is regulated by the
ATF for domestic sales, the DOC has ruled that the product’s unique propulsion design has no impact on its export
classification and the export classification of the TASER 10 CED remains consistent with all other TASER CED models.
Federal regulation of foreign national employees: Our CED development and production is also considered
controlled “technology” by the DOC and is categorized as a “deemed export” for any foreign national employees exposed
to the technology within the United States. Consequently, we must obtain export licenses from the DOC for any deemed
export within the United States made to a foreign national employee exposed to the controlled technology. Deemed export
licenses are subject to DOC approvals and issued licenses require annual status reports for the stated employees. Inability
to obtain proper licensing could curtail our ability to execute R&D and production related to CED technology.
State and local regulation: Our CEDs are controlled, restricted or, less frequently, prohibited by some state and local
governments. Other jurisdictions may ban or restrict the sale of our TASER-branded devices, or restrict their use through
changes to use-of-force laws or regulations, and our product sales may be significantly affected by additional state, county
and city governmental regulation. The change in the TASER 10 CED's propulsion design may impact how the TASER 10
CED is regulated at the state and/or local level depending on each state’s firearm laws.
International regulation of foreign imports and sales: Certain jurisdictions prohibit, restrict or require a permit for the
importation, sale, possession or use of our CEDs (and other select Axon products), including in some countries by law
enforcement agencies, impacting our international sales opportunities.
U.S. and international regulation of component movements globally: We rely on a global supply chain of components
across our product lines with most final assembly occurring in the United States. Export of these components is subject to
shifting regulatory landscapes imposed by both foreign and U.S. authorities. Abrupt changes to these regulations can result
in delays or interruptions to final product supplies. Additionally, ATF regulation of certain imports of the TASER 10 CED
components may impact our supply chain agility.
International regulation of foreign-based operations: We maintain foreign operations in several countries globally
for purposes of logistics, selling, general and administrative (“SG&A”) services, and R&D support. Depending on these
activities, applicable regulations may include business activity licensing and registration, import permits and
recordkeeping, warehousing and storage security and permitting, and government reporting. Any failure to comply with
these requirements could impact our ability to sell, support or develop our products and services both internationally and in
the United States.
We offer products and services that some jurisdictions determine to be “prohibited” or “controlled” weapons under
applicable local arms brokering regulations. Consequently, jurisdictions with such regulations, particularly those that are
signatories to the Arms Trade Treaty, can require certain covered groups and our employees to receive weapons brokering
licenses. Brokering license issuance and approval is not always guaranteed and is subject to the applicable policy of the
approving jurisdiction. Denial or limitations on brokering activity can impact the ability of individual employees to proceed
with weapons brokering activity in certain instances.
Federal Procurement Regulations
Our U.S. government business is subject to specific procurement regulations, such as the Federal Acquisition
Regulation, and a variety of socioeconomic and other requirements imposed by executive order and statute. These
requirements, although customary in U.S. government contracts, increase our performance and compliance costs. These
costs might increase in the future, thereby reducing our margins, which could have an adverse effect on our business,
financial condition, results of operations and cash flows. In addition, the U.S. government will likely continue to
implement new requirements focused on initiatives to drive efficiencies, affordability and cost savings and other changes to
its procurement practices to meet governmental interests. These initiatives and changes to procurement practices may
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change the way U.S. government contracts are solicited, negotiated and managed, which may affect whether and how we
pursue opportunities to provide our products and services to the U.S. government, including the terms and conditions under
which we do so, which may have an adverse impact on our business, financial condition, results of operations, and cash
flows.
Failure to comply with applicable regulations and requirements could lead to contractual, civil, criminal, and
administrative remedies such as termination, fines, penalties, repayments or compensatory or treble damages, or suspension
or debarment from U.S. government contracting or subcontracting for a period of time or indefinitely. Among the causes
for suspension or debarment are violations of various laws and regulations, including those related to procurement
integrity, export control, U.S. government security, employment practices, protection of the environment, accuracy of
records, proper recording of costs and foreign corruption. The termination of a U.S. government contract or relationship as
a result of any of these violations would have an adverse impact on our operations and could have an adverse effect on our
standing and eligibility for future U.S. government contracts.
Privacy Regulations
We are subject to various U.S. and foreign laws and regulations associated with the collection, processing, storage
and transmission of personally identifiable information and other sensitive and confidential information. This data is wide
ranging and relates to our employees, customers and other third parties, including the subjects of law enforcement. Our
compliance obligations include those prescribed under laws and regulations that dictate whether, how and under what
circumstances we can receive, control, process, hold and/or transfer certain data that is critical to our operations, including
data shared between countries or regions in which we operate and data shared among our products and services. If one or
more of the legal mechanisms for transferring data from other countries to the United States is invalidated, if we are unable
to transfer data between and among countries and regions in which we operate, or if we are prohibited from sharing data
among our products and services, it could affect the manner in which we provide our products and services or adversely
affect our financial results. Countries may also pass legislation implementing data protection requirements or requiring
local storage and processing of data or similar requirements that could increase the cost and complexity of delivering our
products and services and expose us to significant penalties for non-compliance. For example, the European Parliament
adopted the General Data Protection Regulation, effective May 2018, that extended the scope of European privacy laws to
any entity that controls or processes personal data of European Union residents in connection with the offer of goods or
services or the monitoring of behavior and imposes compliance obligations concerning the handling of personal data.
Further, Vietnam's Personal Data Protection Decree, which entered into force July 1, 2023, applies to organizations
(wherever based) so long as they participate in personal data processing in Vietnam. We are also subject to U.S. laws and
regulations, including the California Privacy Rights Act, which provides enhanced consumer protections for California
residents, a private right of action for data breaches and statutory fines and damages for data breaches or other California
Consumer Privacy Act violations, as well as a requirement of “reasonable” cybersecurity, which could subject us to
additional compliance costs as well as potential fines, individual claims, class actions and commercial liabilities.
Any inability, or perceived inability, by us to adequately address privacy concerns, or comply with applicable laws,
regulations, policies, industry standards and guidance, contractual obligations or other legal obligations, even if unfounded,
could result in significant regulatory and third-party liability, increased costs, disruption of our business and operations, and
a loss of confidence and other reputational damage. Furthermore, as new privacy laws and regulations are implemented, the
time and resources needed for us to comply with such laws and regulations continues to increase and become a significant
compliance workstream.
Environmental Regulations
We are subject to various U.S. federal, state, local and foreign laws and regulations governing the environment,
including restricting the presence of certain substances in our products and making us financially responsible for the
collection, treatment, recycling and disposal of such products. The European Union has published Directives on the
restriction of certain hazardous substances in electronic and electrical equipment (the “RoHS Directive”) and on electronic
and electrical waste management (the “WEEE Directive”). The RoHS Directive restricts the use of a number of substances,
including lead. The WEEE Directive directs members of the European Union to enact laws, regulations and administrative
provisions to ensure that producers of electric and electronic equipment are financially responsible for the collection,
recycling, treatment and environmentally responsible disposal of certain products sold into the European Union. In
addition, similar environmental legislation has been enacted in other jurisdictions, including the United States (under
federal and state laws) and other countries.
In addition, the European Union has defined a regulation for the registration, evaluation, authorization and restriction
of chemicals that places responsibility on companies to manage the risks from chemicals contained in products and to
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provide safety information about such substances. Manufacturers and importers are required to gather information on the
properties of the chemical substances in their products and provide for their safe handling. As of January 5, 2021,
companies supplying products in the European Union containing substances of very high concern as identified by the
European Union have to submit information on these products to the European Chemicals Agency. The information in their
database is then made available to waste operators and consumers.
Other countries have adopted chemical restrictions regulations, including the United States, Canada and Australia.
For example, U.S. governmental authorities are increasingly focused on preventing environmental contamination from per-
and polyfluoroalkyl substances (“PFAS”), which may be contained in certain Axon products. Federal and state
governments and agencies are in various stages of considering and/or implementing laws and regulations requiring the
reporting, restriction and/or phase-out of PFAS in products.
In addition, further environmental or climate change disclosure legislation may be enacted in the jurisdictions in
which we operate, including the United States (under federal and state laws) and other countries, the cumulative impact of
which could be significant. For example, the European Union’s Corporate Sustainability Reporting Directive and the
United Kingdom’s Streamlined Energy and Carbon Reporting introduce additional due diligence and disclosure
requirements addressing sustainability that apply or we expect will apply, as applicable, to us over the coming years.
Further, in September 2023, California passed the Climate Corporate Data Accountability Act and the Climate-Related
Financial Risk Act, requiring increased climate-related reporting. While currently stayed, the SEC’s recently adopted
climate-related reporting requirements, to the extent they become effective, will also require extensive additional disclosure
regarding sustainability.
These requirements will, and changes in environmental or climate change disclosure laws, regulations or rules could,
lead to increased costs of compliance, including remediations of any discovered issues and changes to our operations. Such
changes could include those related to our manufacturing practices and/or product designs, which may be significant and
could negatively impact our business, results of operations, financial condition and competitive position. Any failures to
comply could result in governmental action, including the imposition of fines, or demands or orders that we modify or
cease existing business practices, which could adversely affect our financial results.
Human Capital Resources
Our success depends on the continued service of our employees and on our ability to continue to attract, retain and
motivate top talent. To achieve this, we strive to foster a diverse and inclusive environment at Axon, offering equitable
opportunities for growth and development, supported by strong compensation and benefits and by programs that build
connections between our employees and their communities. Axon’s mission is central to our recruiting and retention
efforts.
As of December 31, 2024, we had more than 4,100 full-time employees and more than 870 temporary employees
(which include contractors, interns and individual consultants). During 2024, the number of our full-time employees
increased by approximately 770 or 23%, primarily in our R&D, operations and sales organizations. Employee growth was
further driven by our acquisitions that were completed in the year.
We are committed to providing a comprehensive and competitive total rewards package to attract, motivate, and
retain top talent. We review our programs annually to ensure they align with market practices in the industries and
countries where we operate. Our global benefits include broad-based stock grants and performance-based bonuses,
comprehensive healthcare and retirement benefits, paid parental and family leave, commuter benefits, unlimited paid time
off for U.S. exempt employees, and flexible leave options for non-exempt and international employees. Additionally, we
provide free access to virtual coaching and therapy through Modern Health, as well as support programs for employees
navigating significant life events.
We prioritize career advancement and internal mobility by encouraging employees to explore traditional career paths
or pursue cross-functional opportunities that often result in promotions. Employees are supported through structured
mentorship and rotational programs, as well as access to self-directed virtual training platforms, role-specific on-the-job
learning opportunities, and leadership and technical skill-building workshops. Our focus on development, combined with
competitive benefits, enabled us to close the year with a regrettable attrition rate2 of less than 1%, well below our annual
goal of 1.5%. Employees reported a higher than 89% satisfaction score for feeling proud to work at Axon during our 2024
employee engagement survey and an 86% satisfaction score on recommending Axon as a great place to work.
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2 Regrettable attrition is defined as rolling 12-month attrition of employees rated as top performing in the prior
performance rating cycle.
We are committed to maintaining a workplace where all employees feel respected and valued. We hire, evaluate, and
promote employees based on merit, skills, and performance, with zero tolerance for harassment, retaliation, violence, or
discrimination based on race, color, religion, national origin, gender, sexual orientation, gender identity, gender expression,
age, disability, or veteran status. To reinforce this commitment, all employees complete anti-harassment training during
onboarding and repeat it annually. Leadership training is provided throughout the year to ensure managers are equipped to
address and resolve employee concerns effectively.
Health and Safety
The health and safety of our employees is of utmost importance to us. We conduct regular self-assessments and audits
to ensure compliance with our health and safety guidelines and regulatory requirements. Our ultimate goal is to achieve a
level of work-related injuries as close to zero as possible through continuous investment in our safety programs. We
provide protective gear (e.g., eye protection, masks and gloves) as required by applicable standards and as appropriate
given employee job duties.
Corporate Information
We were incorporated in Arizona in September 1993 as ICER Corporation. We changed our name to AIR TASER,
Inc. in December 1993 and to TASER International, Incorporated in April 1998. In January 2001, we reincorporated in
Delaware as TASER International, Inc. and, in April 2017, changed our name to Axon Enterprise, Inc.
Available Information
Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, proxy
statements and amendments to those reports filed with or furnished to the SEC are available free of charge on our website
at http://investor.axon.com as soon as reasonably practicable after we electronically file with or furnish to the SEC such
material. We routinely post information that may be important to investors on our website at http://investor.axon.com, and
we use this website address as a means of disclosing material information to the public in a broad, non-exclusionary
manner for purposes of the SEC’s Regulation Fair Disclosure (Reg FD).The information on our website, including
information about our trademarks, is not incorporated by reference into or otherwise a part of this Annual Report on Form
10-K. The SEC maintains a website that contains reports, proxy statements and other information regarding issuers that file
electronically with the SEC at http://www.sec.gov.
Item 1A. Risk Factors
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.
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•
We may not successfully manage our growth or plan for future growth.
•
We depend 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.
•
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 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 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 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 two depository institutions.
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•
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.
•
We are subject to evolving corporate governance and public disclosure regulations and expectations, including
with respect to environmental, social and governance (“ESG”) matters, that could expose us to numerous risks.
•
Our amended and restated bylaws include exclusive forum provisions that could increase costs to bring a claim,
discourage claims or limit the ability of our shareholders to bring a claim in a judicial forum viewed by
shareholders as more favorable for disputes.
Risks Related to our Convertible Notes
•
Fulfilling our debt obligations requires significant cash resources, which may exceed our available cash flow.
•
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and
operating results.
•
Conversion of the Notes may dilute the shareholder ownership and could depress the price of our common stock.
•
Changes in the accounting treatment for the Notes may have a material effect on our reported financial results.
•
The 2027 Note Hedge and Warrant transactions may impact the value of the Notes and our common stock.
•
We are exposed to counterparty risk with respect to the 2027 note hedge transactions.
Our past financial performance may not be a reliable indicator of our future performance and historical trends should
not be used to anticipate our results or trends in future periods because of the following factors and other variables affecting
our operating results. You should carefully consider the trends, risks and uncertainties described below and other
information in this Annual Report on Form 10-K and subsequent reports filed with or furnished to the SEC before making
any investment decision with respect to our securities. If any of the following trends, risks or uncertainties actually occurs
or continues, our business prospects, financial condition, results of operations or cash flows could be materially adversely
affected, the trading prices of our securities could decline, and you could lose all or part of your investment. All forward-
looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this
cautionary statement.
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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.
Our largest customer vertical is U.S. federal, state and local law enforcement. Axon has a customer relationship with
a substantial number of federal, state and local law enforcement agencies in the United States. At any point, whether or not
related to the performance of our products and services, law enforcement agencies may elect to no longer purchase or use
our CEDs or other products and services. For example, we believe that in the past our sales were adversely impacted by
negative coverage and publicity surrounding our products and services and their use and this could occur in the future,
including as a result of factors beyond our control. If law enforcement agencies no longer purchase our products and
services, or materially decrease their purchases, 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 could be diminished.
For the years ended December 31, 2024, 2023 and 2022, we derived a significant portion of our revenues from sales
of CEDs and related products and services, whether sold individually or as part of a subscription plan offering. We
anticipate that these products will continue to account for a significant portion of our revenue for the foreseeable future.
The acceptance of these devices is critical to our business prospects, operating results and financial condition. If we cannot
continue to meet customer demands or achieve more widespread market acceptance of these products, our business
prospects, operating results, and financial condition will be materially adversely affected.
Demand for CED products is affected by several factors, many of which are beyond our control, including continued
market acceptance of our products by our customers, technological change, and growth or contraction of the economy in
general. Additionally, our CEDs and other offerings or products could fail to maintain or attain sufficient customer
acceptance for many reasons, including:
•
our failure to predict market demand accurately, whether as a result of a failure to anticipate demand for product
features or functionality or to supply offerings that meet this demand;
•
real or perceived defects, errors or failures;
•
negative publicity about product performance or effectiveness;
•
delays in releasing to the market our improved offerings or enhancements, or defects, errors or failures while
releasing such offerings or enhancements;
•
real or perceived failure to offer complementary products that enhance the functionality of our offerings;
•
introduction or anticipated introduction of competing products; and
•
budget constraints or other limitations for our customers.
A decrease in the selling prices of or demand for these products, or their failure to maintain broad market acceptance,
would significantly harm our competitive position, business prospects, operating results and financial condition.
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.
Our future success will likely depend on our ability to develop new products or product features that achieve market
acceptance in a timely and cost-effective manner and in a way that is responsive to customer demand. The development of
new products and product features is complex, time-consuming and expensive, and we may experience delays or incur
significant additional costs in completing the development and introduction of new products. We may choose to carry
higher levels of inventory to mitigate the risk of production delays, which may expose us to an increased risk of
obsolescence.
We have devoted, and continue to devote, significant resources to develop and deploy SaaS solutions to a large
number of customers. If there is a substantial increase of new customers in a small window, we may have difficulty
deploying these solutions in a way that meets market demand. Increases in customer demand may require us to change our
16
IT infrastructure, expand our IT infrastructure or replace our IT infrastructure entirely. Scaling and adapting our IT
infrastructure is likely to be complex and require additional technical expertise. If we are required to make any changes to
our IT infrastructure, we may incur substantial costs and experience delays or interruptions in our solutions. These delays
or interruptions may cause customers to become dissatisfied with our solutions and move to competing providers. Our
failure to accommodate increased traffic, increased costs, inefficiencies or failures to adapt to new technologies or
customer requirements and the associated adjustments to our IT infrastructure could harm our business prospects, operating
results and financial condition.
Additionally, customers’ requirements for these products are complex and varied. If we cannot develop scalable
solutions that can be consistently configured for customers with minimal effort or grow and maintain a professional
services team that can consistently configure our products to meet the requirements of large numbers of customers in a
timely and cost-effective manner, our ability to broadly scale SaaS solutions could be negatively impacted, and our
business prospects, operating results and financial condition could be negatively impacted.
We cannot provide any assurance that products that we may develop in the future will achieve market acceptance. If
we fail to develop new products or new product features on a timely basis that achieve market acceptance, our business,
financial results and competitive position could be adversely affected.
We face risks associated with rapid technological change and new competing products.
The technology associated with law enforcement devices and software receives significant attention and is rapidly
evolving. The introduction of products embodying new technologies and the emergence of new industry standards can
render existing products obsolete and unmarketable. In particular, AI and machine learning technologies are rapidly
developing and as these technologies are incorporated into our products and the operations of our customers, the pace of
change has in the past and may in the future continue to accelerate. Additionally, we expect our products to meet and keep
pace with evolving security standards and requirements of our industry and customers, including those of the U.S. federal
government and international governments. While we have some patent protection in certain key areas of our Axon
devices, CEDs and SaaS technology, new technology may result in competing products that operate outside our patents and
could present significant competition for our products, which could adversely affect our business, financial results and
competitive position. Additionally, our competitors may develop competing technologies or products with superior features
or lower costs, respond quicker to emerging technologies, conduct more extensive marketing campaigns, have greater
financial, marketing, manufacturing and other resources, and may be more successful in attracting potential customers,
employees and strategic partners. If we cannot compete effectively, our business and financial results could be adversely
affected.
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.
Our distribution strategy is to pursue sales through multiple channels primarily through direct sales and independent
distributors. We focus on direct sales to larger agencies and our inability to grow sales to these agencies in this manner
would materially adversely affect our business prospects, operating results, and financial condition. In addition, our
inability to establish relationships with and retain distributors who we believe can successfully sell our products would
materially adversely affect our business prospects, operating results, and financial condition. If we do not competitively
price our products, meet the requirements of our distributors or end-users, provide adequate marketing support, or comply
with the terms of our distribution arrangements, our distributors may fail to aggressively market our products or may
terminate their relationships with us. These developments would likely have a material adverse effect on our sales. Our
reliance on the sales of our products by others also makes it more difficult to predict our revenue, cash flow, and operating
results.
In certain states and foreign jurisdictions, we have chosen to sell directly with law enforcement customers rather than
through established distribution channels. However, some of our customers may have strong working relationships with
distributors, and we may face resistance to this change. Failure to overcome this resistance and successfully establish direct
relationships with our customers could negatively impact sales, or our competitors may be better positioned by continuing
to sell through distributors, which could adversely affect our business prospects, operating results and financial condition.
Negative publicity could adversely impact sales, which could cause our revenues or operating results to decline.
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Our business depends on the reputation of the Axon brand. If we are unable to maintain the position of the Axon
brand, our business may be adversely affected by diminishing the appeal of the brand to our customer base. This could
result in lower sales and earnings.
Our reputation and our brands have in the past been, and could in the future be, damaged by negative publicity,
whether or not merited or as a result of actions that are within our control. Negative publicity could relate to our company,
our brands, our products, our supply chain, our packaging, our employees or any other aspect of our business. We could
experience negative publicity (which may be raised by consumer advocacy groups, third-party interest groups, investors,
employees or other stakeholders) for a variety of reasons, including as a result of product safety issues, threatened or
pending legal or regulatory proceedings, product claims, advertising and promotional practices, sustainability or policy
issues, materials sourcing or cybersecurity incidents. Negative publicity that damages one of our brands could be
compounded by having an adverse effect on our other brands or our company as a whole.
In addition, unfavorable media or investor and analyst reports related to our industry, company, brand, marketing,
personnel, operations, business performance, or prospects may affect our common stock price and the performance of our
business, even if the publicity is not directly related to our company or our brands and even if the publicity is not accurate.
Furthermore, the speed at which negative publicity is disseminated has dramatically increased through use of electronic
communication, including social media outlets, websites and other digital platforms. Alternatively, our employees may
knowingly or inadvertently use digital or social media platforms in ways that may not be aligned with out digital or social
media strategy and could damage our reputation or our brands. Our success in maintaining and enhancing our brand
depends on our ability to adapt to rapidly changing media environments. Adverse publicity or negative commentary from
any media outlet could damage our reputation, require us to expend substantial resources to remedy the damage or reduce
the demand for our products and services, which would all adversely affect our business and financial results.
Acquisitions of, or investments in, other products, technologies or businesses could disrupt our business, dilute
shareholder value, and adversely affect our operating results.
Our business strategy has included, and may continue to include, acquiring or investing in other complementary
products, technologies, or businesses. Identifying and negotiating these transactions can be time-consuming, difficult, and
expensive. Additionally, our ability to close these transactions has previously, and may in the future, depend on obtaining
third-party approvals, such as government regulatory approvals and clearances, which are beyond our control.
Consequently, we can make no assurance that these transactions once undertaken and announced, will close.
Acquisitions or investments may present unforeseen operating difficulties and expenses. If we acquire businesses,
technologies or products, we may encounter difficulties in successfully integrating the acquired personnel, operations,
systems, technologies, or products successfully, or effectively managing the combined business. Anticipated benefits of
such transactions may not materialize due to factors such as:
•
inability to integrate or profitably benefit from acquired products, technologies or businesses;
•
failure to obtain regulatory approvals, clearances or certifications;
•
exposure to new regulations related to the acquired products, technologies, or business that are unexpectedly
burdensome, negatively impact existing products, technologies or business, or require significant investment in
order to achieve compliance;
•
unanticipated costs, liabilities, or risks related to the transaction, such as those arising from litigation, government
inquiries, regulatory actions;
•
identified or unknown security vulnerabilities in acquired technologies that expose us to additional security risks
or delay integration;
•
cultural misalignment with the acquired company, as well as disruptions to our workplace environment or investor
perception;
•
unionization or labor organization efforts leading to work stoppages, strikes, or disruptions in business operations;
•
incurrence of costs related to the transaction and integration;
•
difficulty integrating the accounting and information systems, operations and personnel of the acquired business;
•
inability to enhance the acquired technologies and platforms to meet the quality, performance, and brand standards
expected by our customers;
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•
difficulties and additional expenses associated with supporting legacy products and hosting infrastructure of the
acquired business;
•
challenges aligning the acquired company’s revenue recognition policies and forecasting methods;
•
write-offs of acquired assets or investments, credit risks, or other financial impacts associated with acquired
customers;
•
challenges transitioning acquired customers to our systems, processes, and contractual terms;
•
diversion of management’s attention;
•
harm to existing business relationships with business partners and customers;
•
loss of key employees;
•
diversion of critical resources, including substantial portions of available cash, away from other parts of our
business;
•
shareholder dilution resulting from the issuance of new equity to finance the transaction;
•
incurrence of debt on unfavorable terms, repayment difficulties, or significant financial liabilities arising out of the
acquisition or investment; and
•
exposure to adverse tax consequences, substantial asset depreciation, or deferred compensation expenses.
We cannot assure you that the anticipated benefits of any acquisition or investment will be realized, that projected
synergies will materialize, or that we will not be exposed to unknown liabilities or risks. Integrating an acquired
technology, asset, or business into our operations can be challenging, complex, and costly, and we cannot assure you that
we will be successful or that the anticipated benefits of the acquisitions or investments that we complete will outweigh their
costs. If our integration and development efforts are unsuccessful and the anticipated benefits of the acquisitions we
complete are not achieved, our business prospects, operating results and financial condition could be adversely affected.
In connection with these types of transactions, we may issue additional equity securities that would dilute our
shareholders, use cash that we may need in the future to operate our business, incur debt on terms unfavorable to us or that
we are unable to repay, incur large charges or substantial liabilities, encounter difficulties integrating diverse business
cultures and values or become subject to adverse tax consequences, substantial depreciation, or deferred compensation
charges. These challenges could adversely affect our business prospects, operating results and financial condition.
We may not successfully manage our growth or plan for future growth.
Since our founding in 1993, we have experienced rapid growth. The growth and expansion of our business places a
continuous and significant strain on our management, operational, and financial resources. Further growth of our
operations to support our customer base, our expanding third-party relationships, our information technology systems, and
our internal controls and procedures may not be adequate to support our operations. Managing our growth will also require
significant expenditures and allocation of valuable management resources, including the challenges of integrating,
developing, and motivating a growing employee base in various countries around the world.
In addition, our rapid growth may make it difficult to evaluate our future prospects. Our ability to forecast our future
results of operations is subject to a number of uncertainties, including our ability to effectively plan for and model future
growth. We have encountered in the past, and may encounter in the future, risks and uncertainties frequently experienced
by growing companies in rapidly changing industries. If we fail to achieve the necessary level of efficiency in our
organization as it grows, or if we are not able to accurately forecast future growth, our business would be harmed.
We depend 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.
Our future success depends upon our ability to retain executive officers, including Patrick W. Smith, and any failure
to do so could adversely impact our new product development, business prospects, operating results and financial
condition.
Among other qualifications, Patrick W. Smith is the founder of Axon and brings extensive executive leadership
experience in the technology industry, including the management of worldwide operations, sales, service and support as
well as technology innovation as an inventor listed on over 50 U.S. patents. Mr. Smith has been instrumental in building
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the public safety operating system of the future by integrating a suite of hardware devices and cloud-based software
solutions that lead to modern policing and help save lives. From the early days of founding the organization to today as a
market leader, Mr. Smith’s expertise has brought forth entirely new product categories, including the less-than-lethal
TASER de-escalation platform, body cameras and cloud software that modernize public safety.
The loss of any of our senior management, including Patrick W. Smith, could interrupt our ability to execute our
business plan, as such individuals may be difficult to replace.
Operational Risks
Unavailability of materials or higher costs could adversely affect our financial results.
We depend on domestic and international suppliers for the delivery of components used in the assembly of our
products. Our reliance on third-party suppliers creates risks related to our potential inability to obtain an adequate supply of
components or sub-assemblies and reduced control over pricing and timing of delivery of components and sub-assemblies,
including single or sole-source components used in the manufacture of our products. Specifically, we depend on suppliers
of sub-assemblies, machined parts, injection molded plastic parts, printed circuit boards, semiconductors, custom wire
fabrications and other miscellaneous custom and off-the-shelf parts for our products. Although we may implement long-
term agreements with strategic suppliers to mitigate the risk of supply continuity, disruptions remain possible.
Additionally, if our suppliers do not allocate sufficient production, they may decommit from agreed supply levels, or
inaccurately forecast demand, we may face reduced access to components and need to secure new suppliers. As the scale of
our hardware production increases, we need to accurately forecast, purchase, warehouse and transport components at high
volumes to our manufacturing facilities. If we are unable to accurately match the timing and quantities of component
purchases to our actual needs, we may incur costs related to unexpected production disruption, storage, transportation,
expedite, and write-offs, which may harm our business prospects and financial condition.
The TASER 10 CED presents additional supply chain challenges due to its unique design and regulatory
requirements, including, for example, the regulation of imports and exports of certain TASER 10 CED components. We
also purchase raw materials for TASER 10 CEDs from a limited number of suppliers, some of which may be subject to
market price fluctuations that we may be unable to pass through to our customers. Because of the unique requirements of
TASER 10 CEDs, we cannot change suppliers easily. Any delay or interruption in the supply of the raw materials that are
used in TASER 10 CEDs could impair our ability to manufacture and deliver TASER 10 CEDs, harm our reputation, or
cause a reduction in revenues.
A significant number of our raw materials or components comprise petroleum-based products or incur some form of
landed cost associated with transporting the raw materials or components. Our freight and import costs and the timely
delivery of our products could be adversely affected by the materialization or re-emergence of a number of factors that
could reduce the profitability of our operations, including, for example: higher fuel costs (including increased petroleum
prices as a result of, among other things, climate change-related regulations); supply chain shortages; potential port
closures or shipping disruptions; customs clearance issues; increased government regulation or regulatory changes for
imports of foreign products into the United States and exports from foreign sources; and delays created by war, terrorist
attacks or threats, public health issues, national disasters or work stoppages. We are also subject to supply chain disruption
if any of our suppliers violate legislation that bans the import of goods based on their method of production, such as using
forced labor or sanctioned raw material suppliers. This may also result in negative publicity regarding our production
methods, and alleged unethical or illegal practices of any of our suppliers could adversely affect our reputation. Any
interruption of supply for any material components of our products could significantly delay the shipment of our products
and have a material adverse effect on our revenues, profitability and financial condition. For example, there have been and
may continue to be disruptions in the semi-conductor supply chain that could negatively impact our ability to make our
products.
If significant tariffs or other restrictions continue to be placed on foreign imports by the United States, our sales and
results of operations may be harmed. For example, ongoing trade tensions between the United States and China have led to
a series of significant tariffs on the importation of certain product categories into the United States over recent years. In
retaliation for these tarrifs, China has recently placed restrictions on the export of certain raw materials, including gallium
and germanium. Further, President Trump has proposed significantly increased tariffs on foreign imports into the United
States, particularly from China, Mexico and Canada. Such tariffs could have a significant impact on our business,
particularly the importation of products used in our business that are manufactured outside the United States, or could
result in our products exported from the United States being subject to retaliatory tariffs imposed by other countries. We
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also source certain raw materials from foreign countries, as do some of our suppliers. The implementation of tariffs and
trade restrictions as well as changes in trade policies between the United States and such foreign countries could lead to
increases in our supply costs and make it more difficult to obtain suppliers and may have an adverse effect on our supply
chain from a cost and sourcing perspective. If we attempt to renegotiate prices with suppliers or diversify our supply chain
in response to tariffs, such efforts may not yield immediate results or may be ineffective. We might also consider
increasing prices to the end consumer; however, this could reduce the competitiveness of our products and adversely affect
net sales. If we fail to manage these dynamics successfully, gross margins and profitability could be adversely affected.
Increased tariffs or trade restrictions implemented by the United States could have a material adverse effect on our business
prospects, operating results and financial condition.
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.
Global economic uncertainty continues to pose risks to our business, driven by factors such as ongoing conflicts in
Gaza and Ukraine, the volatility of interest rates, high inflation, changes in U.S. immigration policy, an actual recession or
fears of a recession, trade policies and tariffs, and geopolitical tensions. Our inability to offset price inflation in our
materials, components, shipping or labor through increased prices to customers with long-term fixed-price contracts and
formula-based or long-term fixed-price contracts with suppliers could adversely affect our business prospects, operating
results and financial condition. Global supply chain and labor market challenges could also negatively affect our and our
suppliers’ performance. Interest rate increases have also created financial market volatility and could further negatively
impact financial markets, lead to an economic downturn or recession, or have an adverse effect on our financial results.
Economic slowdowns can also negatively impact municipal and state tax collections and put pressure on law enforcement
budgets, which may increase the risk that our customers will be unable to appropriate funds for existing or future contracts
with us. In addition, geopolitical risks could affect our customers’ budgets and policies. These and other factors may
adversely affect customer demand and ability to pay, cause decrease in sales, and negatively impact the realizability of our
accounts and notes receivable and contract assets.
If demand for our products increases, our future success will depend on our ability to manage our growth and to
increase manufacturing production capacity.
A significant increase in demand for our products may require us to expand our production capacity while
maintaining product quality. Our primary strategies to meet this challenge include introducing additional shifts, increasing
the physical size of our assembly facilities, hiring additional production staff, and implementing additional customized
manufacturing automation equipment. As we develop additional products, we may need to bring new equipment online,
implement new systems, technology, methods and processes, and hire personnel with different qualifications. The costs
associated with implementing new manufacturing technologies, methods and processes, including the purchase of new
equipment, and any resulting delays, inefficiencies or loss of sales, could harm our financial results. The investments we
make in equipment, technologies or personnel may not yield the anticipated labor and material efficiencies, and we may
experience difficulty in attracting, integrating and retaining qualified personnel. Our inability to meet any future increase in
sales demand or effectively manage our expansion could have a material adverse effect on our revenues, operating results
and financial condition.
Delays in product development schedules may adversely affect our revenues and cash flows.
The development of CEDs, devices, sensors, and software is complex and time-consuming. Achieving market
acceptance requires accurately anticipating customer needs and delivering products that adapt to evolving demands in a
timely and cost-effective manner. Customers may require product features and capabilities that our current products do not
have. If we fail to develop products that satisfy customer requirements, our ability to create or increase demand for our
products could be adversely affected.
Without the timely and cost-effective introduction of new products, services, and enhancements, our offerings will
likely become less competitive over time, in which case our competitive position and operating results could suffer. New
products and services, and enhancements to existing products and services, can require long development and testing
periods and significant investment, including substantial R&D, development of different engineering and manufacturing
workflows, and adjustments to our data and analytics infrastructure. Our focus on our SaaS platform also presents complex
development issues. Significant delays in new product or service releases or problems in creating new products or services
could adversely affect our business, growth prospects, operating results, cash flows, and competitive position.
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We expend significant resources in anticipation of a sale due to our lengthy sales cycle and may receive no revenue
in return.
Before committing to purchase our products, our end-user customers typically consider a wide range of issues such as
product benefits, training costs, the cost to use our products in addition to or in place of other products, budget constraints
and product reliability, safety and efficacy. Because we sell to various types of non-government and government entities of
multiple sizes, including national agencies, state agencies, county agencies and municipal agencies, which can require
varying levels of approvals followed by appropriations, the length of our sales cycle may range from a few weeks to as
long as several years. Adverse publicity surrounding our products or the safety of such products has in the past, and could
in the future, lengthen our sales cycle with customers. We believe that in the past our sales were adversely impacted by
negative coverage and publicity surrounding our products or the use of our products. We may incur substantial selling costs
and expend significant effort in connection with the evaluation of our products by potential customers before they place an
order. If these potential customers do not purchase our products, we will have expended significant resources and received
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 or our customers’ data, it could undermine 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.
Security breaches of our products and services could result in the unauthorized release, gathering, monitoring,
misuse, loss or destruction of our customers’ data. Additionally, breaches of our network or data security measures or those
of our third-party providers—including cloud storage providers, suppliers and vendors—could disrupt the security of our
internal systems and business applications, impair our ability to provide products and services to our customers and protect
the privacy of their data, result in product development delays, result in theft or misuse of our intellectual property or other
assets, require us to allocate more resources to improve technologies, or otherwise materially adversely affect our business.
Supply chain vulnerabilities, such as compromised third-party software, hardware, or components, could further expose our
systems to cyber risks which could materially adversely affect our business.
Because the techniques used to obtain unauthorized access, or to sabotage systems, change frequently, grow more
complex over time, and generally are not recognized until launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. The delayed detection of sophisticated threats could allow
attackers to remain undetected within our systems for extended periods, increasing the potential damage to our operations,
intellectual property, and customer data. Moreover, our security measures and those of our third-party service providers or
customers have not in the past and may not in the future immediately detect such security breaches if they occur. Although
we have developed systems and processes that are designed to protect our data and user data, to prevent or detect data loss
and security breaches, we have been in the past and are likely to remain a frequent target of third-party cybersecurity
intrusion attempts and we cannot assure that such measures will provide absolute security. We have in the past and may in
the future incur significant costs in protecting against or remediating cyber-attacks.
We also face increasing and evolving disclosure obligations related to cyber and other security events. Despite
rigorous processes, we risk failing to meet all our existing or future disclosure obligations or having our disclosures
misinterpreted. National security or public safety considerations may also affect, or in limited instances prevent, our public
disclosure of a cybersecurity incident in certain circumstances.
We devote significant resources to engineer secure products and ensure security vulnerabilities are mitigated, and we
require our third-party service providers to do so as well. Remote-work arrangements may increase our exposure to
cyberattacks due to vulnerabilities in unsecured devices, networks, and employee environments. Breaches could occur
during transfer of data-to-data centers or at any time, and result in unauthorized physical or electronic access to our or our
customers’ data. Third parties may attempt to fraudulently induce employees or customers into disclosing sensitive
information such as usernames, passwords or other information to gain access to our data or our customers’ data.
Additionally, hackers may develop and deploy viruses, worms and other malicious software programs that attack or gain
access to our networks and data centers. Recent developments in the threat landscape include use of AI and machine
learning by attackers to automate, enhance, and evade detection during cyberattacks, along with an increased number of
cyber extortion and ransomware incidents. These attacks can feature higher financial ransom demands and demonstrate
increasing sophistication, including novel ransomware techniques, diverse methodologies, and advance capabilities such as
adaptive malware and deepfake-enabled phishing schemes. Increasing socioeconomic and political instability in some
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countries has heightened these risks. In addition, retaliatory acts by foreign governments in response to Western sanctions
could include cyber-attacks that could directly or indirectly impact our operations.
A security breach could expose us to a risk of loss or inappropriate use of proprietary and sensitive data, or the denial
of access to this data. A real or perceived security breach could also result in a loss of confidence in the security of our
products and services, damage our reputation, disrupt our business, subject us to third-party lawsuits, regulatory fines or
investigations or otherwise subject us to legal liability, negatively impact our future sales and significantly harm our
business prospects, operating results and financial condition. Even the perception of inadequate security may damage our
reputation and negatively affect our ability to win new customers or retain existing customers.
Catastrophic events could materially adversely affect our business prospects, operating results, and financial
condition.
A disruption or failure of our systems or operations in the event of a major earthquake, weather event, fire, water
shortage, explosion, failure to contain hazardous materials, industrial accident, utility failure, cyber-attack, terrorist attack,
public health crisis, pandemic, or other catastrophic event could cause delays in completing sales, providing products and
services, or performing other mission-critical functions. A catastrophic event that results in the destruction or disruption of
any of our critical operations, or of the capacity, reliability or security of our information technology systems, could harm
our ability to conduct normal business activities and our operating results, as well as expose us to claims, litigation and
governmental investigations and fines. Such events may also jeopardize employee safety and availability, causing
additional delays or operational challenges. In addition, catastrophes may put pressure on federal, state and municipal
government budgets, which may increase the risk that our customers will be unable to appropriate funds for existing or
future contracts with us. These and other factors may adversely affect customer demand and their ability to pay, cause
decrease in sales, and negatively impact the realizability of our accounts receivable and contract assets. Furthermore,
service delays or failures during such events could damage our reputation, especially with public safety customers, and
erode trust in our ability to deliver reliable solutions during critical times.
Public health emergencies have adversely affected workforces, economies and financial markets globally, and led to
an economic downturn in the past and may do so again in the future.
We may also face threats to our physical security, including to our facilities and the safety and well-being of our
people. In addition to the potential catastrophic events described above, these threats could involve insider threats,
workplace violence, or civil unrest, which could adversely affect our company. Our customers and suppliers face similar
risks that, if realized, could also adversely impact our operations. Such acts could cause delays, manufacturing downtime,
or other impacts that could detrimentally impact our ability to perform our operations. We could also incur unanticipated
costs to remediate impacts and lost business.
If our backup and mitigation plans are insufficient to minimize business disruption, our financial results could be
adversely affected. We are continuously monitoring our operations and intend to take appropriate actions to mitigate the
risks arising from catastrophic events, but there can be no assurances that we will be successful in doing so.
Uncertainty in the development, deployment, and use of AI in our products and services, as well as our business
more broadly, could adversely affect our business and reputation.
We offer systems and tools that incorporate AI-based technologies, including generative AI, for our customers. We
also leverage and expect to continue leveraging AI-based technologies for internal use to drive efficiency in our business
operations. As with many new and emerging technologies, AI presents numerous risks and challenges to our internal
business operations and our customers. For example, unexpected failures or inaccuracies in AI-driven systems could
expose our customers to operational risks, particularly in high-stakes use cases such as law enforcement or public safety.
The development, adoption, integration and use of generative AI technology remains in the early stages and
consequently, our AI technology may contain material defects or errors. Additionally, ineffective or inadequate AI or
generative AI governance, development, use or deployment practices by us or third parties could result in unintended
consequences. For example, AI algorithms that we use may be flawed or may be (or perceived to be) based on datasets that
are biased or insufficient, a risk raised by the ACLU in a report dated December 10, 2024. Biases in AI models could result
in discriminatory outcomes, eroding trust among customers and communities we serve.
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Any latency, disruption, or failure in our AI systems, third-party AI systems that we utilize, or infrastructure could
cause delays or errors in our offerings. Additionally, inadequate governance, testing, or quality assurance processes could
result in flawed deployments, including those that result in physical harm or which produce erroneous or harmful outputs
that may damage our reputation and expose us to legal liabilities. Correcting such defects or errors may be costly and time-
consuming and could harm our business. Failure to adequately train customers on the use and limitations of AI-driven
products could also compound these risks. Thoroughly testing generative AI models is challenging due to their complexity
and the unpredictability of their outputs. Developing, testing, and deploying resource-intensive AI systems may require
additional investment and increase our costs. There also may be real or perceived social harm, environmental harm,
unfairness or other outcomes that undermine public confidence in the deployment and use of AI. Furthermore, third parties
may deploy AI technologies in a manner that reduces customer demand for our products and services. Competitive
pressures may also drive rapid AI development or deployment, increasing the risk of releasing inadequately tested or
unreliable features. Any of the foregoing may result in decreased demand for our products and services or harm to our
business, financial results, or reputation.
The legal and regulatory landscape surrounding AI technologies is rapidly evolving and uncertain, particularly in
areas of intellectual property, cybersecurity, privacy, and data protection. For example, there is uncertainty around the
validity and enforceability of intellectual property rights related to our development, deployment and use of AI. Cyber
attacks that use AI may also become increasingly frequent and effective. Additionally, third parties that license AI
technologies to us may impose unfavorable licensing terms or terminate the licenses altogether, requiring us to seek
licenses from alternative sources to avoid disruptions in feature delivery.
Compliance with new or changing laws, regulations, or industry standards relating to AI may impose significant
operational costs and may limit our ability to develop, deploy or use AI technologies. In part due to our global scope and
law enforcement customer base, we may face heightened scrutiny and regulatory requirements, which could further
increase compliance costs and limit our ability to develop, deploy or use our AI solutions or other AI technologies. For
example, the AI Act in the European Union imposes compliance requirements on a variety of AI uses by law enforcement,
as well as on the companies that develop those products, including us. Other jurisdictions may adopt similar measures in
the future. In the future, we may voluntarily or involuntarily initiate recalls if our products are determined by us or a
regulatory authority to be noncompliant with applicable laws and regulations. Such recalls, whether voluntary or
involuntary, could result in significant expense, supply chain complications, and may harm our brand, business, prospects,
financial condition and operating results. Please also see “Operational Risks—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” in Part I, Item 1A of this Annual Report on Form 10-K below for additional information.
We may also face increased scrutiny regarding data privacy and security risks related to the data we use to train and
evaluate AI models, as breaches or misuse of this data and associated terms and conditions could expose us to significant
liabilities. For example, while we do not use customer data to train AI models today, we do occasionally use data obtained
from the Axon Customer Evidence Improvement Program (“ACEIP”) for evaluation and we may use ACEIP data to also
train models in the future, while ensuring proper consents and compliance with applicable laws. This approach reflects our
commitment to responsible data usage and governance. However, there remains a significant risk in the nature of data used
by third-party providers to train the AI models we rely on, including whether such third-party providers have trained AI
models on data that they did not have proper consents for. Failure to appropriately respond to this evolving landscape may
result in legal liability, regulatory action, or brand and reputational harm.
Defects or disruptions in our services could impact demand for our services and subject us to substantial liability.
We rely on third-party cloud service providers located in the United States and other countries to deliver our cloud
services. The use of these cloud service providers gives us greater flexibility in efficiently delivering a more tailored,
scalable customer experience, but also exposes us to additional risks and vulnerabilities. Lack of availability of this
infrastructure could be due to several potential causes such as technical failures, natural disasters, fraud or security attacks
that we cannot predict or prevent. Interruptions in our service, or loss or corruption of digital evidence, may reduce our
revenue, cause us to issue credits or pay penalties, cause customers to file litigation against us, cause customers to
terminate their subscriptions, and adversely affect our renewal rates and our ability to attract new customers.
Our business will also be harmed if our customers and potential customers believe our service is unreliable. Since our
customers use our services for important aspects of their operations, any errors, defects, disruptions in service or other
performance problems could hurt our reputation and may damage our customers’ operations. Additionally, the inability to
recover or restore lost or corrupted digital evidence in a timely manner could result in significant reputational damage. This
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risk is particularly acute for law enforcement and public safety customers, where service reliability is critical, and
disruptions could have serious operational or legal consequences. As a result, customers could elect not to renew our
services or to delay or withhold payment to us. Delayed resolution of service outages or technical defects could also lead to
prolonged dissatisfaction and erosion of customer trust. We could also lose future sales or customers may make warranty or
other claims against us, which could result in an increase in our warranty expense, an increase in collection cycles for and
decline in the collectability of accounts receivable or in the convertibility of contract assets to cash, and an increase in the
expense and risk of litigation.
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.
Complex components and assemblies used in our products may contain undetected defects that could be subsequently
discovered at any point in the life of the product. Errors or defects in our products, including software-related errors or
defects, may only be discovered after they have been tested, commercialized and deployed. In such event, we may incur
significant additional development costs and product recall, repair or replacement costs, or liability for personal injury or
property damage caused by such errors or defects. In particular, defects in products designed for public safety or law
enforcement use could undermine customer and community trust, erode confidence in our brand, and result in heightened
scrutiny or regulatory enforcement. Our reputation or brand may be damaged as a result of these problems and may result
in difficulty retaining current customers and securing new contracts. Defects in our products could result in a loss of sales,
delay in market acceptance, damage to our reputation and increased warranty costs, which could adversely affect our
business, financial results and competitive position.
Additionally, we are subject to the U.S. Consumer Products Safety Act of 1972, as amended by the Consumer
Product Safety Improvement Act of 2008, which empowers the Consumer Products Safety Commission to exclude from
the market products that are found to be unsafe or hazardous, and similar laws under foreign jurisdictions. We could also
face challenges with cross-border compliance if products are recalled in multiple jurisdictions, further increasing
operational and financial burdens. Under certain circumstances, the Consumer Products Safety Commission or comparable
foreign agencies could require us to repurchase or recall one or more of our products. If we were required to remove, or we
voluntarily remove, our products from the market, our reputation could be tarnished, and we might have large quantities of
finished products that we could not sell. A recall of critical components may also disrupt manufacturing and delay delivery
of other products in our portfolio, compounding the adverse effect on our business.
Our international operations expose us to additional risks that could harm our business prospects, operating results,
and financial condition.
We have significant international operations and plan to continue growing internationally by acquiring existing
entities and setting up new legal entities in new markets. In certain international markets, we have limited operating
experience and may not benefit from first-to-market advantages or otherwise succeed. Our international operations expose
us to other risks, including:
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restrictions on foreign ownership and investments, along with stringent foreign exchange controls, could limit our
ability to repatriate cash earned in countries outside the United States;
•
import and export requirements, tariffs, trade disputes, product certification mandates, sanctions, and customs
could hinder our ability to offer products or services in certain countries or obtain necessary parts and components
to manufacture products;
•
longer payment cycles in certain countries, heightened credit risk, and higher instances of payment fraud;
•
uncertainty regarding liability for our products and services, including uncertainty resulting from local laws and
lack of legal precedent; and
•
differing labor laws and customs, existence of workers’ councils and labor unions, and other challenges caused by
distance, language, and cultural differences.
Our suite of products is export-controlled under both United States and international regulatory bodies. Changes in
U.S. foreign policy, foreign governmental status and evolving international human rights policy objectives may impact
Axon’s ability to obtain licenses for a given destination or customer.
Trade regulations include, among other categories, environmental regulations, climate- and sustainability-related
regulations, tax and statutory financial regulations, export and import controls, customs and duties regulations, internal
25
control and disclosure rules, privacy and data protection requirements, anti-corruption laws, and other local laws
prohibiting corrupt payments to governmental officials, and competition regulations.
Violations of these laws and regulations could result in fines and penalties, criminal sanctions against us, our
directors, officers, or employees, as well as prohibitions on the conduct of our business and on our ability to offer our
products and services in one or more countries. They could also materially adversely affect our brand, international growth
efforts, ability to attract and retain employees, business, and operating results. Although we have implemented policies and
procedures designed to ensure compliance with these laws and regulations, there can be no assurance that our directors,
officers, employees, contractors, or agents will not violate our policies nor that enforcement actions by regulators will be
consistent. Furthermore, inconsistent enforcement of local laws and regulations in some jurisdictions may increase
compliance uncertainty and risk.
We depend on our ability to attract and retain our key management, sales and technical personnel.
Our success depends upon the continued service of our key management personnel. Although we have entered into
employment agreements with our key personnel, including Mr. Smith, these agreements have no specific duration and
constitute at-will employment, which means they may terminate their employment with us at any time. Additionally, we do
not maintain any key person insurance on any of our officers or employees. Any changes in our senior management team,
even in the ordinary course of business, may be disruptive to our business. Such changes may result in a loss of
institutional knowledge and cause disruptions to our business. Losing any member of our existing senior management team
could also damage key seller relationships, lead to unanticipated replacement, recruitment and training costs, and make it
more difficult to operate our business and achieve our business goals. Additionally, if our senior management team fails to
work together effectively or execute our plans and strategies on a timely basis as a result of management turnover or
otherwise, our business could be harmed.
Our success also depends on our ability to continue to attract, retain and motivate qualified technical employees. Our
ability to compete effectively and our future success depends on our continuing to identify, hire, develop, motivate and
retain highly skilled personnel. In particular, we compete with many other companies for employees with high levels of
expertise in our industry, as well as for skilled engineers (including those with highly sought after experience in fields such
as data science or AI), sales, and operations professionals. Job candidates may also be threatened with legal action under
agreements with their existing employers if we attempt to hire them, which could impact hiring and result in a diversion of
our time and resources. In addition, we are selective in our hiring process which requires significant investment of time and
resources from internal stakeholders and management. At times, we have experienced, and we may continue to experience,
difficulty in hiring personnel who meet the demands of our selection process and with appropriate qualifications,
experience, or expertise, and we may not be able to fill positions as quickly as desired. In addition, our recruiting
personnel, methodology, and approach may need to be altered to address a changing candidate pool and profile. We may
not be able to identify or implement such changes in a timely manner.
Restrictive U.S. immigration policies and regulatory changes may also affect our ability to hire, mobilize or retain
some of our global talent. Many of our technical personnel are foreign nationals entering the United States on work visas,
primarily under the H-1B visa classification. The H-1B visa classification enables U.S. employers to hire qualified foreign
nationals in positions that require an education at least equal to a bachelor’s degree. U.S. immigration laws and regulations
are subject to legislative and administrative changes, as well as changes in the application of standards and enforcement.
Future restrictions on the availability of work visas could restrain our ability to acquire the skilled professionals needed to
meet our customers’ requirements, which could have a material adverse effect on our business. The scope and impact of
these changes remain unclear, however a narrow interpretation and vigorous enforcement of existing laws and regulations
could adversely affect the ability of entities with which we subcontract to utilize foreign nationals and/or renew existing
foreign national consultants on assignment. There can be no assurance that we will be able to keep or replace all foreign
nationals currently employed, or continue to acquire foreign national talent at the same rates as in the past.
In addition, our compensation arrangements, such as our equity incentives, may not always be successful in attracting
new employees and retaining and motivating our existing employees. In particular, we may face challenges in hiring
personnel, particularly for executive-level engineering talent, whether as a result of competition with other companies or
other factors. We have had and expect to continue to have unique equity incentives designed to attract and retain long-term
employees. We utilize these plans to align pay and performance and drive shareholder returns while reducing near-term
cash expenditures. Our equity incentives and ongoing stock and option grants are subject to having sufficient shares under
our stock plan and any new plans or increases in the number of shares available for grant under existing plans must be
approved by our shareholders. If we are unable to obtain shareholder approval, we may be unable to attract and retain top
26
talent, including senior executives. Our ability to attract, retain and motivate employees may also be adversely affected by
common stock price volatility. The loss of the service of one or more of our key personnel could adversely impact our
business prospects, operating results and financial condition.
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.
The TASER 10 CED is primarily regulated by the Bureau of Alcohol, Tobacco, Firearms and Explosives (the
“ATF”), which regulates the manufacture, sale and import of firearms in the United States primarily under the National
Firearms Act of 1934, the Gun Control Act of 1968, and the Firearms Owners’ Protection Act of 1986, which have been
amended from time to time.
The ATF conducts periodic audits of our facilities that hold federal firearms licenses. If we fail to comply with ATF
rules and regulations, the ATF may limit our activities or growth related to the TASER 10 CED, fine us, or, ultimately,
suspend our ability to produce and sell the TASER 10 CED product line. Such audits may also expose operational
inefficiencies or create delays that affect production timelines or access to necessary permits. Also, various state and local
laws, regulations, and ordinances relating to firearm characteristics, features and sales govern the TASER 10 CED product
line. Axon and local distributors must comply with state and local laws, regulations, and ordinances pertaining to firearm
and magazine sales in the jurisdictions where the TASER 10 CED is sold. Non-compliance with such laws could expose us
to legal liability, reputational harm, and additional costs with remedying violations. Additionally, certain TASER 10 CED
components are regulated for import into the United States by the ATF and are subject to ATF import permits that limit
Axon’s ability to source from some suppliers leading to a potential decrease in supply chain agility. Supply chain
constraints or an inability to source TASER 10 CED components could have a material adverse effect on our business
prospects, operating results and financial condition.
Federal and state legislatures frequently consider legislation relating to the regulation of firearms, including the
amendment or repeal of existing legislation. Existing laws may also be affected by future judicial rulings and
interpretations. These possible changes to existing legislation or the enactment of new legislation may seek to restrict the
makeup of a firearm, mandate the use of certain technologies in a firearm, remove existing legal defenses in lawsuits, set
minimum age limits to purchase certain firearms, or ban the sale and, in some cases, the ownership of various types of
firearms and accessories. In addition, evolving public sentiment or political pressure regarding firearm regulation could
impact customer demand for TASER 10 CEDs, especially in jurisdictions with stricter firearm laws. Such restrictions or
bans could have a material adverse effect on 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 in
our company to diminish and the value of our common stock to decline.
Preparing our consolidated financial statements involves many complex manual and automated processes, which
depend on individual data input or review and require significant management judgment. The increasing complexity of our
operations, including growth in international markets and expansion of product offerings, further heightens the risk of
control deficiencies. Acquired businesses may have insufficient internal controls, which may have been identified or
unidentifiable during diligence, that could require significant remediation efforts and create additional risks of financial
misstatements during integration. One or more of these processes may result in errors that may not be, and in the past have
not been, immediately detected and could result in a material misstatement or other errors in our consolidated financial
statements. Such errors may be more likely to occur when implementing new systems and processes, particularly when
implementing evolving and complex accounting rules. The Sarbanes-Oxley Act of 2002 requires, among other things, that
as a publicly traded company we disclose whether our internal control over financial reporting and disclosure controls and
procedures are effective.
A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such
that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be
prevented or detected on a timely basis. While we continually undertake steps to improve our internal control over financial
reporting as our business changes, we may not be successful in making the improvements and changes necessary to be able
to identify and remediate control deficiencies or material weaknesses on a timely basis. Our ability to address deficiencies
may also be constrained by resource limitations, including access to skilled accounting personnel, particularly during
periods of rapid growth or cost pressures. We identified a material weakness in our internal control over financial reporting
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as of December 31, 2024 related to a failure to design and maintain effective controls related to revenue recognition for our
customer contracts. Specifically, we did not design and maintain controls to update our revenue recognition policies to
reflect changes in product offerings or terms and conditions of arrangements with customers to ensure revenue was
appropriately recognized and disclosed in accordance with U.S. GAAP. We are working to remediate the material
weakness as further discussed in Item 9A of this Annual Report on Form 10-K. If we cannot successfully remediate
identified control deficiencies, including any current or future material weaknesses in our internal control over financial
reporting: the accuracy and timing of our financial reporting may be adversely affected; our liquidity, access to capital
markets and perceptions of our creditworthiness may be adversely affected; we could face difficulty forecasting our
financial results accurately, impacting decision-making by investors and analysts; we may be unable to maintain
compliance with securities laws, stock exchange listing requirements and debt instruments’ covenants regarding the timely
filing of periodic reports; we may be subject to regulatory investigations and penalties; investors may lose confidence in
our financial reporting; we may suffer defaults under our debt instruments; and our common stock price may decline.
Our revision of previously issued consolidated financial statements may adversely affect investor confidence and
could result in regulatory actions and stockholder litigation.
The revision of certain of our previously issued financial statements to correct errors related to our historical
conclusions of principal vs. agent accounting under Accounting Standards Codification, Revenue from Contracts with
Customers ("ASC 606") may have the effect of eroding investor confidence in the Company and our financial reporting
and accounting practices and processes and may raise reputational issues for our business. Such revision may also result in
stockholder litigation against us, or adverse regulatory consequences. Any such regulatory consequences, litigation, claim
or dispute, whether successful or not, could subject us to additional costs, divert the attention of our management, or impair
our reputation. Each of these consequences could have a material adverse effect on our business prospects, operating
results and financial condition.
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 strategy includes maintaining a significant portion of our business through a subscription model, which aligns
with the municipal budgeting process of our customers and allows for multiple product offerings to be combined into
existing subscriptions. This approach differs from a traditional hardware sale, where the entire hardware payment is
commonly invoiced upon shipment, by spreading payments over the subscription or installment period. While this model
provides predictable recurring revenue, it impacts liquidity, as cash is received in multiple installments rather than upfront.
We record an estimate of expected credit losses and perform ongoing reviews of trade accounts receivables.
However, if we become aware of information related to the creditworthiness of a major customer, or if future actual default
rates on receivables in general differ from those currently anticipated, we may have to adjust our expected credit loss
reserve. Such adjustments could negatively impact earnings and require additional resources for collections or restructuring
customer payment terms. Furthermore, our reliance on municipal and government customers may heighten the risk of
delayed payments during periods of political or economic instability, such as government shutdowns or reduced tax
revenues. Any of these factors could adversely affect our business prospects, operating results and financial condition.
Our gross margin depends on many factors, including our product mix, cost structure, and acquisitions we may
make, any of which could cause our gross margin to fluctuate.
Our gross margin could decline in future periods due to adverse impacts from various factors, including:
•
changes in product mix;
•
changes in shipment volume;
•
increased warranty costs;
•
sales discounts;
•
expanding into new markets or lower-margin markets, including those with distinct pricing and cost structures,
through acquisitions or internal development;
•
higher production costs;
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•
increases in materials, labor, manufacturing, or supply chain logistics;
•
excess inventory and obsolescence charges;
•
increased amortization of purchased intangible assets, especially from acquisitions; and
•
how well we execute on our strategy and operating plans.
Any of these factors could result in significant fluctuations in our gross margin. This variability and unpredictability
could lead to our inability to meet internal expectations or those of securities analysts or investors for a particular period.
Failure to meet or exceed such expectations for these or any other reasons may adversely affect the market price of our
stock.
Revenue for our SaaS products is recognized over multi-year contract terms, which may delay the reflection of new
business in our operating results.
Our SaaS revenue is generally recognized ratably over the terms of the contracts, which ranges from one to ten years.
As a result, most of the SaaS revenue we report each quarter is the result of agreements entered into during previous
quarters. Consequently, current trends, whether positive or negative, may not be fully reflected in our revenue results for
several periods, and a decline in new or renewed SaaS contracts in any period may not be immediately reflected in our
reported financial results for that period, but could result in a decline in our revenue in future reporting periods. If any of
our assumptions about revenue from our SaaS delivery model are incorrect, our actual results could differ materially from
those anticipated, estimated, or projected.
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.
A significant portion of our end-user customers are government agencies, which typically lack direct control over
their budgets. These budgets are often influenced by legislative processes and political considerations, limiting the
agencies' ability to allocate funds as they see fit. There can be no assurance that the economic and political pressures will
not adversely affect sales of our products.
Additionally, government procurement processes are often subject to scheduling delays and uncertainties, which can
disrupt anticipated sales. Federal agencies, in particular, are vulnerable to broader governmental challenges, such as
funding and debt limit constraints, which has previously resulted in government shutdowns, including those in 2018 and
2019, and additional shutdowns narrowly avoided more recently.
While we enter into contracts for the delivery of products and services in the future, and anticipate that these contracts
will be completed, if agencies fail to appropriate funds in future year budgets, terminate contracts for convenience, or if
other cancellation clauses are invoked, this would prevent us from recognizing anticipated revenue and cash flow.
Contracts terminated without cause generally allow us to recover only our incurred costs, committed expenses, and a
portion of profits, if any, on the work completed prior to termination. We may or may not be able to recover all the costs
incurred during the start-up phase of a terminated contract.
The unexpected termination of significant contracts could result in substantial revenue shortfalls. If these shortfalls
are not offset by corresponding reductions in expenses, our financial performance and overall business could be adversely
affected. We cannot anticipate if, when, or to what extent our customers might terminate their contracts with us.
The open bidding process introduces uncertainty in securing future contract awards.
Governmental agencies often procure products and services through an open bidding process, which typically
involves publishing a list of requirements and soliciting proposals from potential vendors. To compete successfully in these
requests for proposals, we must accurately estimate our cost structure for servicing a proposed contract, the time required to
establish operations for the proposed customer, and the likely terms of any other third-party proposals submitted. However,
we cannot guarantee that we will win future bids or that any winning bids will ultimately result in contracts with favorable
terms.
Our contracts typically have fixed terms, with the possibility of extension at the discretion of the contracting entity.
When these contracts expire, contracts may be reopened to competing bidders, and there is no guarantee that the contracts
will be renewed or extended. In some cases, customers may initiate the bidding processes earlier than expected, resulting in
29
increased competition prior to the anticipated end of contracts. Additionally, many of our contracts with government
agencies include termination for convenience provisions that may allow our customers to terminate the contract earlier than
their term length.
Failure to secure new contracts, retain existing ones, or negotiate favorable terms through the open bidding process
could adversely impact our revenues, profitability, and overall financial performance.
We hold the majority of our cash balances, some of which are not insured, at two depository institutions.
We hold the majority of our cash and cash equivalents accounts at two depository institutions. Our balances with
these and other institutions regularly exceed Federal Deposit Insurance Corporation insurance limits for domestic deposits,
as well as various foreign deposit insurance programs. For additional discussion, refer to Note 1 in Part II, Item 8 of this
Annual Report on Form 10-K.
If any of these depository institutions were to fail (as seen with several U.S. bank failures in spring of 2023), and
their assets were insufficient to cover deposits, or if governments did not take action to support deposits exceeding existing
insurance limits, we could incur losses related to the uninsured balances. Such losses or delays in accessing funds could
materially and adversely affect our liquidity, operating results and financial condition.
Stock transactions may have a material, unpredictable impact on our operating results and may result in dilution to
existing shareholders.
We have historically granted and expect to continue to grant stock-based compensation to employees and non-
employee directors as a means of attracting and retaining highly qualified personnel. All stock-based awards are required to
be recognized in our financial statements based on their grant date fair values. The amount recognized for stock
compensation expense could vary depending on a number of assumptions or changes that may occur.
Changes in the subjective and probability-based assumptions can materially affect the estimates of the fair value of
the awards and timing of recognition of stock-based compensation expense and, consequently, the related amount
recognized in our consolidated statements of operations and comprehensive income.
As we continue to mature, the incentives to attract, retain and motivate employees provided by our equity awards or
by future arrangements may not be as effective as in the past. We may also issue equity securities to pay for acquisitions
and grant stock-based awards to retain the employees of acquired companies. If we issue significant equity awards to
attract additional employees, to retain our existing employees or related to acquisitions, we could incur substantial
additional stock-based compensation expense and the ownership of our existing shareholders would be further diluted,
which could depress the market price of our stock.
Our financial performance is subject to risks associated with changes in the value of the U.S. dollar versus local
currencies.
For international customers (whether current or potential) whose contracts are or would be denominated in U.S.
dollars, the relative change in local currency values creates relative fluctuations in our product pricing. These changes in
international end-user costs may result in lost orders and reduce the competitiveness of our products in certain foreign
markets. 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.
For non-U.S. dollar denominated sales, weakening of foreign currencies relative to the U.S. dollar generally leads us
to raise international pricing, potentially reducing demand for our products. Should we decide not to raise local prices to
fully offset the dollar’s strengthening, the U.S. dollar value of our foreign currency denominated sales and earnings would
be adversely affected. We do not currently engage in hedging activities related to fluctuations in foreign currency.
Fluctuations in foreign currency could result in a change in the U.S. dollar value of our foreign denominated assets and
liabilities, including accounts receivable. Therefore, the U.S. dollar equivalent collected on a given sale could be less than
the amount invoiced causing the sale to be less profitable than contemplated.
We also import selected components that are used in the manufacturing of some of our products. Although our
purchase orders are generally in U.S. dollars, weakness in the U.S. dollar could lead to price increases for the components.
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Unanticipated changes in our effective tax rate and additional tax liabilities could adversely affect our operating
results and financial condition.
We are subject to income taxes in the United States and various other jurisdictions. Our effective tax rate could be
impacted by changes in statutory tax rates, the geographic distribution of our earnings, and the application of top-up taxes
introduced under global minimum tax regulations of the Organization for Economic Co-operation and Development
(“OECD”) framework. Our tax expense could also be impacted by changes in non-deductible expenses, excess tax benefits
from stock option exercises and RSU vesting, adjustments to the valuation of deferred tax assets and liabilities, the
applicability of withholding taxes, and changes in unrecognized tax benefits. Although we believe that our tax estimates are
reasonable, the ultimate tax determination involves significant judgments that could become subject to audit by tax
authorities in the ordinary course of business. Our estimates are based on information available to us at the time we prepare
the income tax provision.
We are subject to potential tax examinations in multiple jurisdictions. While we regularly evaluate new information to
adjust our tax position, there is no guarantee that the outcome of these examinations will not adversely affect our operating
results and financial condition.
Our tax provision could also be impacted by changes in U.S. federal, state, local, or international tax laws, including
significant tax reforms which target corporate multinationals, and proposals by the current or future administrations.
Additionally, we may be subject to additional tax liabilities due to changes in income-based taxes resulting from
changes in U.S. federal, state, local, or foreign tax laws, changes in tax jurisdictions’ administrative interpretations,
decisions, policies and positions, results of tax examinations, settlements or judicial decisions, changes in accounting
principles, changes to our business operations, including acquisitions, as well as the evaluation of new information that
results in a change to a tax position taken in a prior period.
Furthermore, recommendations from the OECD for a global minimum income tax and other changes, are being
implemented or considered in jurisdictions where we operate. While we believe enactment of the recommended framework
in jurisdictions where we operate will result in minimal impacts to our financial results in the near term, the impact of any
new tax legislation may differ materially from our estimates due to future regulatory guidance or changes in our
interpretations or assumptions we have made. See “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Provision for Income Taxes” in Part II, Item 7 of this Annual Report on Form 10-K for additional
information.
Our revenue and operating results may fluctuate unexpectedly from quarter-to-quarter, which could impact our
stock price.
Several factors, including some beyond our control, may affect our revenue and operating results, potentially causing
our common stock price to fluctuate, including:
•
budgetary cycles of municipal, state, and federal law enforcement and corrections agencies;
•
market acceptance of our products and services;
•
the timing of large domestic and international orders;
•
the outcome of any existing or future litigation;
•
adverse publicity surrounding our products, the safety of our products, or the use of our products;
•
changes in our sales mix;
•
new product introduction costs;
•
increased raw material expenses;
•
changes in our operating expenses, including stock-based compensation expense;
•
changes in foreign currency exchange rates, inflation, and interest rates;
•
inventory obsolescence;
•
changes in warranty reserve;
31
•
existing or future tariffs; and
•
regulatory changes that may affect the marketability of our products and services.
As a result of these and other factors, we believe that short-term period-to-period comparisons of our operating results
may not provide meaningful insights, and our performance in a particular period may not be indicative of our performance
in any future period. Additionally, fluctuations in our revenues and operating results could lead to declines in the market
price of our common stock.
Our profitability could suffer from declines in fair value or impairment of our investments, including our strategic
investments, and could fluctuate if the fair values of our investments increase.
We invest a portion of available funds in a portfolio consisting of securities of various types. Our investments consist
of investments in both marketable and non-marketable securities. Investments in marketable securities are measured at fair
value on a recurring basis. We generally have elected to apply the measurement alternative for non-marketable securities.
Under the alternative, we measure investments without readily determinable fair values at cost, less impairment, adjusted
by observable price changes and we assess for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. Our future investment income may fall short of expectations due to changes in
interest rates, or due to certain inherent risks involved in investments in early-stage privately held companies. For example,
we have recognized and may in the future recognize an unrealized loss on an investment if we determine that our carrying
amount for an investment without a readily determinable fair value is not expected to be fully recovered, which would
cause our earnings performance to suffer from such losses. By contrast, we have recorded and may in the future record an
unrealized gain on an investment if we determine the fair value exceeds the carrying amount, which would benefit our
earnings performance.
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.
Third parties often use our CED products in aggressive confrontations that may result in serious, permanent bodily
injury or death to those involved. Our CED products may be associated with these injuries. A person, or the family
members of a person, injured or killed in a confrontation or otherwise in connection with the use of our products, may
bring legal action against us to recover damages on the basis of a number of theories, including wrongful death, personal
injury, negligent design, defective product, product performance issues, or inadequate warnings or training. We are
currently subject to a number of such lawsuits and have been and may be in the future subject to significant adverse
judgments and settlements. We may also be subject to lawsuits involving allegations of criminal misuse of our products.
We have no control over how our products are used by our customers or other end-users and cannot ensure they are used
consistent with our specifications, design and warnings. While our products are designed to be non-lethal, we cannot
guarantee they will be used in a manner consistent with their intended use and any misuse exposes us to litigation,
reputational harm and controversy.
Although we maintain product liability insurance in amounts that we believe are reasonable, we may not be able to
maintain such insurance on acceptable terms, if at all, and product liability claims could result in a potential award of
monetary damages in excess of the amount of insurance coverage available to us. Because we manufacture and sell CEDs,
insurance carriers may decide not to insure our products or our company in the future.
Similar to product liability claims, we face exposure to class action lawsuits related to the design, performance,
safety, pricing or advertising of our products. Such class action lawsuits could also result in substantial monetary
judgments, defense costs, business distraction, reallocation of internal resources, injunctions related to the sale of products
and reputational harm.
If successful, the aforementioned claims could result in adverse judgments or unfavorable settlements, significant
legal expenses, a diversion of management’s attention and resources, and reputational harm. The outcome of any litigation
is inherently uncertain and there can be no assurance that our existing or any future litigation will not have a material
adverse effect on our business prospects, operating results and financial condition.
Other litigation, government inquiries and regulatory actions may subject us to significant costs and judgments and
divert management attention from our business.
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We have been and could in the future be involved in numerous other litigation, government inquiries and regulatory
matters relating to our products, contracts, employees and business relationships, including litigation against persons or
entities we believe have infringed on our intellectual property, infringement litigation filed against us, litigation against a
competitor, antitrust litigation, and enforcement actions filed against us. For additional discussion of litigation, refer to
Note 13 in Part II, Item 8 of this Annual Report on Form 10-K.
Such matters have resulted, and are expected to continue to result in, substantial costs to us, including in the form of
attorneys’ fees and costs, damages, fines or other penalties, whether pursuant to an adverse judgment or settlement, and
diversion of our management’s attention, which could adversely affect our business prospects, operating results and
financial condition.
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.
Many companies own intellectual property rights that are directly or indirectly related to public safety technologies.
These companies periodically demand licensing agreements or engage in litigation based on allegations of infringement or
other violations of their patents, trademarks, copyrights or trade secrets. These companies may also allege that their patents
protect features essential to the implementation of particular technical standards. Non-practicing entities may also hold
patents that are directly or indirectly related to public safety technologies. These entities may seek compensation for
perceived infringement of their patents, including by filing claims against us, independent of the merit of any such claims.
As we enter new markets, expand into new product categories, and otherwise offer new products, services and
technologies, additional intellectual property claims may be filed against us by these companies, entities and other third
parties. Additionally, our use of AI tools in our business may increase the likelihood that third parties will claim that we
infringe their intellectual property rights. Intellectual property claims may also be filed against us as our current products,
services and technologies gain additional market share.
If our products, services or technologies were found to infringe a third-party’s proprietary rights, we could be forced
to discontinue use of the protected technology or enter into costly royalty or licensing agreements to be able to sell our
products, services or technologies. Such royalty and licensing agreements may not be available on terms acceptable to us or
at all. We could also be required to pay substantial damages, fines or other penalties, indemnify customers or distributors,
cease the manufacture, use or sale of infringing products or processes, make proprietary source code publicly available,
and/or expend significant resources to develop or acquire non-infringing technologies. Our suppliers may not provide, or
we may not be able to obtain, intellectual property indemnification sufficient to offset all damages, fines or other penalties
resulting from any claims of intellectual property infringement brought against us or our customers. There is no guarantee
that our use of conventional technology searching and brand clearance searching will identify all potential rights holders.
Rights holders may demand payment for past infringements and/or force us to accept costly license terms or discontinue
use of protected technology and/or works of authorship that may include, for example, photos, videos and software. Our
development and sale of software-based products, including that which is related to AI or VR, increases this risk.
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.
Our future success depends upon our proprietary technology. Our protective measures for this proprietary technology
include patents, trademarks, copyrights and trade secret protection. However, these protective measures, as well as our
efforts to pursue such protective measures, may prove inadequate. For example, the value of intellectual property
protection in certain countries may not be apparent until after such protection can no longer be pursued. As such, our
intellectual property protection may not extend to all countries in which our products are distributed or will be distributed
in the future. Though we work to protect our innovations, we may not be able to obtain protection for certain innovations.
For example, we may be unable to patent some software-based products. Furthermore, any use of AI tools to create content
or code that may be incorporated into our products or services may also impact our ability to obtain or successfully defend
certain intellectual property rights. The scope of any patent protection we have obtained, or may obtain, may not prevent
others from developing and selling competing products. Despite our efforts, any intellectual property protection we obtain
may be later determined to be insufficient or ineffective.
Our protective measures may prove inadequate for reasons outside of our control. Varying intellectual property laws
across countries may lead to differences in protection between such countries. In certain countries in which our products
33
are distributed, the ability to effectively enforce intellectual property rights may not exist. Patent requirements differ by
country and certain domestic or international laws may prohibit us from satisfying these requirements, creating a risk that
some of our international patents may become unenforceable. Patents for older technologies, such as those first introduced
in our TASER M26 CED and TASER X26 CED, have expired or will expire due to statutory limits on patent terms.
Despite policies and efforts to maintain secrecy of trade secrets and other confidential information, such information could
be compromised by employees, partners or other third parties.
Once established, there is no guarantee that our intellectual property rights will remain in force. Issued patents may be
re-examined and subsequently ruled invalid or unenforceable. Our registered trademarks may also be diminished or lost.
For example, there is a risk that our “TASER” trademark could become synonymous with the general product category of
“conducted energy devices” resulting in claims of genericness that could interfere with our enforcement efforts and create
customer confusion as to product source. The right to stop others from misusing our trademarks and service marks in
commerce depends, to some extent, on our ability to show evidence of enforcement of our rights against such misuse in
commerce. Our efforts to stop improper use, if ineffective, may lead to the loss of trademark and service mark rights, brand
loyalty and notoriety among our customers and prospective customers.
Inability to protect our intellectual property could negatively impact our commercial efforts and competitive market
advantage. Regardless of the outcome, the prosecution of patent and other intellectual property claims is both costly and
time-consuming. Unauthorized use of our proprietary technology could divert our management’s attention from our
business and could result in a material adverse effect on our business prospects, operating results and financial position.
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.
Our U.S. patents protect us from imported infringing products coming into the United States from abroad. We have
filed applications for patents in foreign countries; however, these may be inadequate to protect markets for our products in
these foreign countries. Each patent is examined and granted according to the law of the country where it was filed
independent of whether a U.S. patent on similar technology was granted. Certain foreign countries have patent working
requirements that require a patent owner to practice a patented invention within the respective country. A patent in a
foreign country may be subject to cancellation, forfeiture, compulsory license or other penalty if the claimed invention has
not been worked in that country. Meeting the requirements of working an invention differs by country and ranges from
sales in the country to manufacturing in the country. U.S. export law, or the laws of some foreign countries, may prohibit
us from satisfying the requirements for working the invention, creating a risk that some of our international patents may
become unenforceable. In a country in which we do not have a patent or a country in which our patent in that country is
unenforceable or unenforced, other companies and makers of similar products may be able to copy our products or features
of our products without consequence, thus limiting our ability to capture market share or protect our technology, which
could materially harm our business prospects and operating results.
The use of open-source software in our products, services and technologies may expose us to additional risks and
harm our intellectual property.
Open-source software is typically freely accessible, usable and modifiable. Certain open source software licenses
require a user who intends to distribute the open source software as a component of the user’s software to disclose publicly
part or all of the source code to the user’s software or require the user of such software to make any derivative works of the
open source code available to others on potentially unfavorable terms or at no cost. The terms of many open-source
licenses have not been interpreted by courts, and there is a risk that those licenses could be construed in a manner that
imposes unanticipated conditions or restrictions on our ability to commercialize our products, services and technologies. In
that event, we could be required to seek licenses from third parties to continue offering our products, to re-develop our
products, to discontinue sales of our products or to release our proprietary software code under the terms of an open-source
license, any of which could harm our business. Although we aim to avoid any use of open source software in our products,
services and technologies, and otherwise only use open source software available under permissive open source licenses, it
is possible that other manners of use, including those that a third-party may allege to be in breach of a corresponding open
source license, may have inadvertently occurred in deploying our products, services and technologies. If a third-party
software provider has incorporated certain types of open-source software into software we license from such third-party for
our products, services and technologies without our knowledge, we could be required to disclose the source code to our
products, services and technologies. This could harm our intellectual property position as well as our business prospects,
operating results and financial condition.
34
A variety of new and existing laws and/or interpretations could materially and adversely affect our business.
As detailed in “Item I. Business – Government Regulation” in this Annual Report on Form 10-K, we are subject to a
variety of laws and regulations in the United States and abroad that involve matters central to our business, including laws
and regulations related to: privacy, data protection, security, retention and deletion; rights of publicity; content; intellectual
property; regulation of certain of our CEDs as firearms; advertising; marketing; distribution; electronic contracts and other
communications; competition; consumer protection; telecommunications; product liability; taxation; labor and
employment; sustainability; economic or other trade prohibitions or sanctions; securities; and online payment services. The
introduction of new products and expansion of our activities in certain jurisdictions, including through acquisitions, or
other actions that we may take may subject us to additional laws, regulations or other government scrutiny. There are
several legislative proposals in the United States, at both the federal and state level, that could impose new obligations in
areas affecting our business. In addition, foreign privacy, data protection, content, competition, sustainability and other
laws and regulations can impose different obligations or be more restrictive than those in the United States.
These U.S. federal and state and foreign laws and regulations, which in some cases can be enforced by private parties
in addition to government entities, are constantly evolving and can be subject to significant change. As a result, the
application, interpretation, and enforcement of these laws and regulations are often uncertain and may be interpreted and
applied inconsistently from country to country and inconsistently with our current policies and practices. New laws and
regulations (or new interpretations of existing laws and regulations) could materially and adversely affect our business.
The cost of compliance with these laws and regulations is high and is likely to increase in the future. Additionally,
these laws and regulations, or any associated inquiries or investigations or other government actions, have in the past and
may in the future delay or impede the development of new products, result in negative publicity, cause customers to delay
purchases, require significant management time and attention, cause us to change our business practices, and subject us to
remedies that may harm our business, including civil or criminal liability, such as fines, demands or orders that we modify
or cease existing business practices. For additional details, refer to “Item I. Business – Government Regulation.”
We are subject to evolving corporate governance and public disclosure regulations and expectations, including with
respect to ESG matters, that could expose us to numerous risks.
We are subject to changing rules and regulations promulgated by several governmental and self-regulatory
organizations, including the SEC, the Nasdaq Stock Market and the Financial Accounting Standards Board (“FASB”).
These rules and regulations continue to evolve in scope and complexity and many new requirements have been created in
response to laws enacted by Congress, making compliance more difficult and uncertain. In addition, increasingly
regulators, customers, investors, employees and other stakeholders are focusing on ESG matters and related disclosures.
These changing rules, regulations and stakeholder expectations have resulted in, and are likely to continue to result in,
increased general and administrative expenses and increased management time and attention spent complying with or
meeting such regulations and expectations. For example, developing and acting on initiatives within the scope of ESG, and
collecting, measuring and reporting ESG-related information and metrics can be costly, difficult and time-consuming and is
subject to evolving reporting standards, including the SEC’s recently adopted and stayed climate-related reporting
requirements, and similar proposals by other domestic or international regulatory bodies. Foreign governments have also
enacted legislation to address ESG issues, such as the UK Modern Slavery Act.
Additionally, unfavorable perception regarding our social initiatives, governance practices, diversity initiatives, the
perceived or actual impacts of our products and services, environmental policies or other growing concerns of our
stakeholders, could adversely affect our reputation. Any negative effect on our reputation could have an adverse effect on
the size of our customer base, which could adversely affect our business and financial results. We have been, and may be in
the future, subject to informal private or public inquiries and formal proxy proposals by activists urging us to take certain
corporate actions related to ESG matters, which may not be aligned with our best interests. These activities may adversely
affect our business in a number of ways, since responding to inquiries or proposals can be costly, time-consuming, and
disruptive to our operations and could meaningfully divert our resources, including the attention of our management team
and our employees.
We may also communicate certain initiatives and goals, regarding environmental matters, diversity, responsible
sourcing and social investments and other ESG-related matters, in our SEC filings or in other public disclosures. These
initiatives and goals within the scope of ESG could be difficult and expensive to implement, the technologies needed to
implement them may not be cost effective and may not advance at a sufficient pace, and we could be criticized for the
accuracy, adequacy or completeness of the disclosure. Further, statements about our ESG-related initiatives and goals, and
35
progress against those goals, may be based on standards for measuring progress that are still developing, internal controls
and processes that continue to evolve, and assumptions that are subject to change in the future. In addition, we could be
criticized for the scope or nature of such initiatives or goals or for any revisions to these goals. Given the dynamic nature of
ESG expectations, standards and regulations, which may change over time, we may from time to time need to update or
otherwise revise our current practices, initiatives and goals, including in response to legislative or legal developments. If
our ESG-related data, processes and reporting are incomplete or inaccurate, or if we fail to achieve progress with respect to
our goals within the scope of ESG on a timely basis, or at all, we may be exposed to potential liability or litigation, and our
reputation, business, financial performance and growth could be adversely affected.
Our amended and restated bylaws include exclusive forum provisions that could increase costs to bring a claim,
discourage claims or limit the ability of our shareholders to bring a claim in a judicial forum viewed by
shareholders as more favorable for disputes.
Our amended and restated bylaws provide that, unless we consent in writing to the selection of an alternative forum,
the Chancery Court of the State of Delaware will be, to the fullest extent permitted by law, the sole and exclusive forum for
(i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a claim of breach of a fiduciary duty
owed by any of our directors, officers or shareholders; (iii) any action asserting a claim arising pursuant to any provision of
the Delaware General Corporation Law or of our amended and restated certificate of incorporation or our amended and
restated bylaws; or (iv) any action asserting a claim against us or any of our directors or officers governed by the internal
affairs doctrine. In addition, our amended and restated bylaws also provide that, unless we consent in writing to the
selection of an alternative forum, the federal district courts of the United States shall be the exclusive forum for the
resolution of any claim arising under the Securities Act. The exclusive forum provision in our amended and restated bylaws
does not apply to suits brought to enforce any duty or liability created by the Exchange Act or any other claim for which
the federal courts have exclusive jurisdiction.
The choice of forum provision may increase costs to bring a claim, discourage claims or limit a shareholder’s ability
to bring a claim in a judicial forum that it finds favorable for disputes with Axon or Axon’s directors, officers or other
employees, which may discourage such lawsuits against Axon or Axon’s directors, officers and other employees.
Alternatively, if a court were to find the choice of forum provision contained in our amended and restated bylaws to be
inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other
jurisdictions.
Risks Related to our Convertible Notes
Fulfilling our debt obligations requires significant cash resources, and we may not have sufficient cash flow to pay
our debt.
As of December 31, 2024, we had $690.0 million in aggregate principal amount outstanding under our 2027 Notes.
Our ability to meet our debt obligations, including making our scheduled payments of the principal and interest payments
or refinancing our indebtedness, depends on our future performance, which is subject to economic, financial, competitive,
and other factors, many of which are beyond our control. If our business fails to generate sufficient cash flow from
operations to meet these obligations and fund capital expenditures, we may be required to adopt one or more alternatives,
such as asset sales, debt restructuring, or raising additional equity capital, which could involve unfavorable or dilutive
terms. Additionally, our ability to refinance our indebtedness will depend on market conditions and our financial standing
at such time, which may not be favorable. Failure to engage in any of these activities on desirable terms could result in a
default on our debt obligations.
The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and
operating results.
If the conditional conversion feature of the Notes is triggered, holders of Notes may choose to convert their Notes
during specified periods at their discretion. If one or more holders elect to convert their Notes, we would be required to
settle any converted principal amount in cash, which could adversely impact our liquidity. Moreover, even if no holders
elect to convert their Notes, applicable accounting rules may require that we reclassify all or a portion of the outstanding
principal of the Notes to a current liability. Such reclassification would materially reduce our net working capital,
potentially affecting our financial flexibility and stability.
36
Conversion of the Notes may dilute the ownership interest of our shareholders or could depress the price of our
common stock.
The conversion of some or all of the Notes could dilute our shareholders’ ownership interests. Upon conversion, we
have the option to pay or deliver cash, shares of our common stock, or a combination of both. If we elect to settle the
remainder, if any, of our conversion obligation exceeding the principal amount of the Notes with shares of our common
stock or a mix of cash and stock, any sales in the public market of our common stock issuable upon such conversion could
adversely affect prevailing market prices of our common stock. Additionally, the existence of the Notes may encourage
short selling by market participants because the conversion of the Notes could be used to satisfy short positions, or
anticipated conversion of the Notes into shares of our common stock could depress the market price of our common stock.
Changes in the accounting treatment for the Notes could have a material effect on our reported financial results.
As of January 1, 2022, we adopted ASU 2020-06, which affects the accounting treatment of the Notes. Accordingly,
we do not bifurcate the liability and equity components of the Notes on our consolidated balance sheet and use the if-
converted method of calculating diluted earnings per share (“EPS”). Under this method, diluted EPS will generally be
calculated assuming that all the Notes were converted solely into shares of common stock at the beginning of the reporting
period, unless the result would be anti-dilutive, which could adversely affect our diluted EPS. Because the principal amount
of the Notes upon conversion is required to be paid in cash, and only the excess is permitted to be settled in shares, the
application of the if-converted method will produce a similar result as the treasury stock method prior to the adoption of
ASU 2020-06. The effect of the treasury stock method is that the shares issuable upon conversion of such Notes are not
included in the calculation of diluted EPS except to the extent that the conversion value of such Notes exceeds their
principal amount.
In accordance with ASU 2020-06, the Notes are reflected as a liability on our consolidated balance sheets, with the
initial carrying amount equal to the principal amount of the Notes, net of issuance costs. The issuance costs have been
treated as a debt discount for accounting purposes, which are and will be amortized into interest expense over the term of
the Notes. As a result of this amortization, the interest expense that we recognize for the Notes for accounting purposes is
greater than the cash interest payments payable on the Notes, thereby resulting in lower reported income.
Future changes made to our accounting standards related to the Notes could have a material effect on our reported
financial results.
The 2027 Note Hedge and Warrant transactions may impact the value of the Notes and our common stock.
In connection with the pricing of the Notes, we have entered into 2027 Note Hedge transactions and Warrant
Transactions with the option counterparties. The Note Hedge transactions are intended to reduce the potential dilution to
our common stock upon any conversion of Notes and offset any cash payments we are required to make in excess of the
principal amount of converted Notes. However, the Warrant transactions could have a dilutive effect on our common stock
to the extent that the market price per share of our common stock exceeds the strike price of the Warrants.
Additionally, the option counterparties or their affiliates may modify their hedge positions by entering into or
unwinding various derivatives tied our common stock, or by buying or selling our common stock or other securities in
secondary market transactions following the pricing of the Notes. These activities could occur prior to the maturity of the
Notes, or and in connection with any conversion, redemption, or repurchase of the Notes. Such actions could cause
fluctuations in the market price of our common stock, either increasing or decreasing its value.
If any of the Note Hedge and Warrant transactions fail to become effective, counterparties or their affiliates may
unwind their hedge positions, which could adversely affect the value of our common stock.
The potential effect of these transactions and activities on the market price of our common stock will depend in part
on market conditions and other factors beyond our control, and their impact cannot be ascertained at this time. Any of these
activities could adversely affect the value of our common stock.
We are exposed to counterparty risk with respect to the 2027 Note Hedge transactions.
37
The option counterparties for the 2027 Note Hedge transactions are financial institutions, and we face the risk that
any or all of them might default on their obligations under these transactions. Our exposure to this credit risk is unsecure,
as the option counterparties have not secured their obligations by any collateral.
If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those
proceedings with a claim equal to our exposure under the 2027 Note Hedge transactions at that time. Our exposure will
depend on many factors, including an increase in the market price and volatility of our common stock.
A default by an option counterparty could lead us to suffer adverse tax consequences and result in greater dilution of
our common stock than we currently anticipate. We cannot provide assurances as to the financial stability or solvency of
the option counterparties, and any default could materially and adversely affect our financial results and shareholder value.
Item 1B. Unresolved Staff Comments
None.
Item 1C. Cybersecurity
Cybersecurity Risk Management and Strategy
Our business is highly dependent on our information systems, including our ability to operate them effectively and to
successfully implement new technologies, methods and processes, as well as adequate controls and cybersecurity incident
recovery plans. We rely on our information systems to manage our business, data, communications, supply chain, ordering,
pricing, billing, inventory replenishment, accounting functions and other processes. In addition, we must protect the
confidentiality and integrity of the data of our business, employees, customers and other third parties. Our business
involves the collection, processing, storage and transmission of personally identifiable information and other sensitive and
confidential information. This data is wide ranging and relates to our employees, customers and third parties, including the
subjects of law enforcement. Our compliance obligations include those prescribed under the laws and regulations that
dictate whether, how and under what circumstances we can receive, process, hold and/or transfer certain data that is critical
to our operations, including data shared between countries or regions in which we operate and data shared among our
products and services.
As part of our company-wide culture of security, we maintain a formal cybersecurity and information security
program that is aligned with the standards set forth by the International Organization for Standardization (“ISO”), the
American Institute of Certified Public Accountants in Systems and Organization Controls 2, the Criminal Justice
Information Services, the Federal Risk and Authorization Management Program and the National Institute of Standards and
Technology. Our Information Security Team maintains the program, which is designed to ensure proper monitoring,
prevention, detection, mitigation and remediation of cybersecurity vulnerabilities, including the prompt investigation and
management of all reported or discovered security events, including cybersecurity threats and incidents, in our ordinary
course of business.
Our cybersecurity and information security programs are designed to comply with key global financial regulations
and cybersecurity laws in the jurisdictions in which we operate. The program includes taking several proactive steps to
prepare for attempts to compromise our information systems. To provide for the availability of critical data and systems,
maintain regulatory compliance, manage our material cybersecurity risks, and protect against, detect and respond to
cybersecurity threats and incidents, we undertake the below listed activities:
•
closely monitor emerging data protection laws and implement changes to our processes designed to comply;
•
undertake regular reviews (at least annually) of our consumer facing and internal policies and statements related
to cybersecurity;
•
proactively inform our customers of substantive changes related to customer data handling;
•
conduct annual information security training for all employees;
•
recruit and retain highly skilled cybersecurity professionals, and provide regular training and development
opportunities for our cybersecurity and information security employees;
•
conduct regular phishing email simulations for all employees and all contractors with access to corporate email
systems to enhance awareness and responsiveness to such possible threats;
38
•
through policy, practice and contract (as applicable), require employees, as well as third parties who provide
services on our behalf, to treat customer information and data with care;
•
perform due diligence on third-party vendors and, based on our risk assessment, put in place contractual
undertakings and oversight to manage and reduce the risks associated with third-party vendors;
•
run tabletop exercises to simulate a response to a cybersecurity incident and use the findings to improve our
technologies, methods and processes;
•
conduct regular risk assessments of our information systems to identify weaknesses, and develop and implement
mitigations to improve our cybersecurity and information security program;
•
conduct regular security assessments, vulnerability scans, and penetration tests (including by third-party
assessment firms) of products systems and internal systems to discover vulnerabilities and apply appropriate
mitigations within standardized timelines;
•
maintain, implement, evaluate and update our cybersecurity technologies to address threats and vulnerabilities;
and
•
carry information security risk insurance that provides protection against the potential losses arising from a
cybersecurity incident.
Third-Party Monitoring and External Reviews
Axon utilizes the assistance of third-party technology and providers to support our objective of protecting our
information, information systems and network. Services provided by third parties to assess the performance of our
cybersecurity risk management systems and procedures and to identify cybersecurity risks to the Company include
assessing products and internal systems for vulnerabilities, incident response services such as computer forensics, internal
and external audits for security certifications globally and overall security program maturity evaluations. Axon and our
service providers have also developed systems and processes that are designed to protect our and our customers’ data, to
prevent data loss, and to prevent or detect cybersecurity threats and incidents.
Material findings, notable weaknesses and suggestions are presented to the Enterprise Risk and Compliance
Committee of the Company’s Board of Directors (the “ERC Committee”) as discussed below.
Cybersecurity Management Team
Our cybersecurity and information security program, which includes data privacy, is the responsibility of our Chief
Information Security Officer (“CISO”), who oversees our global information security program. Our current CISO has
served in various information technology and information security roles over the past 20 years including roles at Netflix,
Salesforce and Facebook, and has served as CISO since February 2024. He also has relevant degrees and certifications,
including a Master of Science degree in Information Assurance from Iowa State University. The information security
program has been built over the last 10 years under the leadership of experienced Information Security professionals.
Our CISO attends quarterly meetings of our Disclosure Committee and provides input on disclosures in our Quarterly
Reports on Form 10-Q and Annual Reports on Form 10-K, including the relevant risk factors set forth therein. Our CISO,
along with the Information Security Team, also leads our Security Incident Response Team, which is responsible for
investigating suspected cybersecurity threats and incidents. In the event of a possibly material cybersecurity incident, the
Information Security Team also includes the following executive team members: Corporate General Counsel, Chief Legal
Officer, Chief Accounting Officer, Chief Operating Officer & Chief Financial Officer and, to the extent practicable or
relevant, other senior executives.
Board of Directors Oversight
As a part of its oversight of the key risks facing Axon, our Board of Directors devotes significant time and attention
to data and systems protection, including cybersecurity and information security risk. While the Audit Committee of the
Company’s Board of Directors (the “Audit Committee”) reviews any significant legal, compliance or regulatory matters
that may have a material impact on our business, financial statements or compliance policies generally, it does so in
consultation with our ERC Committee with respect to any such matters that involve cybersecurity, data privacy or
information technology. The Chair of our ERC Committee is also a member of our Audit Committee, which facilitates
close coordination between the two committees on cybersecurity, data privacy and information technology matters.
Our ERC Committee oversees our overall approach to enterprise risk management, of which cybersecurity is an
important component. The ERC Committee and its Chair, in coordination with the Information Security Team and CISO,
regularly review the categories of risk the Company faces, including any cybersecurity risk exposures, as well as the
39
likelihood of occurrence, the potential impact of those risks, and the steps management has taken to monitor, mitigate and
control such exposures. To facilitate these reviews, the Information Security Team and CISO report at least quarterly to the
ERC Committee with respect to cybersecurity risks, including those identified through review of our business, of rising
threats in the industry, and of the current state of our cybersecurity and information security program. The ERC Committee
makes regular reports to the full Board of Directors regarding updates on cybersecurity and other risks.
Incident Response and Assessment Policies and Procedures
Axon has implemented our cybersecurity and information security program and cybersecurity incident response plan
to protect our and our customers’ data from, and mitigate the effects of, unintentional disclosure as well as cybersecurity
threats and incidents of all severity levels. Our program and response plan outline actions to be taken after identifying a
suspected cybersecurity threat or incident and the people responsible for managing those actions. We have also
implemented disclosure controls and procedures for determining the materiality of a cybersecurity incident to outline
disclosure and communications responsibilities during cybersecurity incidents of all severity levels.
In the event of a possibly material cyber incident, the Security Incident Response Team, under the direction of the
Corporate General Counsel and/or the Chief Legal Officer, would collect and document information relevant to materiality
and make a threshold determination as to whether such cybersecurity incident (including those occurring on the
information systems of third parties) is potentially material. The Security Incident Response Team would meet with the
Chair of the ERC Committee to review the preliminary findings of the Security Incident Response Team, including the
possible factors in determining materiality. If the Security Incident Response Team and the Chair of the ERC Committee
determine that the cybersecurity incident warrants further review after consideration of such findings and factors, the Audit
Committee would be convened for a meeting (to which all members of the ERC Committee would be invited) to review the
cybersecurity incident and the findings of the Security Incident Response Team and the Chair of the ERC Committee. The
Audit Committee would then make a materiality determination consistent with SEC guidance and by considering relevant
quantitative and qualitative factors, informed by any recommendations of the ERC Committee and/or its Chair.
Any materiality assessment that results in a determination that a cybersecurity incident is not material would be
reported by the Information Security Team, or appropriate members of management, to the ERC Committee at its next
scheduled meeting.
At this time, we have not identified any risks from known cybersecurity threats, including as a result of prior
cybersecurity incidents, that have materially affected us, including our operations, business strategy, results of operations
or financial conditions. However, we face certain ongoing risks from cybersecurity threats that, if realized, are reasonably
likely to materially affect us, including our operations, business strategy, results of operations or financial condition. For
additional details, refer to Item 1A in Part I of this Annual Report on Form 10-K.
40
Item 2.
Properties
Our primary corporate headquarters are spread across five facilities and approximately 400,000 square feet in the
Phoenix, Arizona metropolitan area. As of December 31, 2024, we had more than 31 leased locations including Phoenix
and Scottsdale, Arizona; East Point and Peachtree, Georgia; Seattle, Washington; Boston, Massachusetts; San Francisco,
California; Westerville, Ohio; Washington, D.C,; Melbourne and Sydney, Australia; Brussels, Belgium; Daventry and
London, England; Tampere, Finland; Dietzenbach and Kassel, Germany; Delhi, India; Amsterdam, Netherlands; Ho Chi
Minh City and Hanoi, Vietnam; Athens, Greece; Madrid, Spain; Rome, Italy; Toronto, Canada; and Odense, Denmark. We
also own a parcel of land located in Scottsdale, Arizona.
We believe our existing facilities are well maintained and in good operating condition. We also believe we have
adequate manufacturing capacity for our existing product lines. To the extent that we continue to grow and introduce new
products in the future, we will need to acquire additional facilities to locate the associated production lines. However, we
believe we can acquire or lease such facilities on reasonable terms. We continue to make investments in capital equipment
as needed to meet anticipated demand for our products.
The majority of our locations support both of our reportable segments, except for our Vietnam, Finland, and Seattle,
Washington locations, which primarily support our Software & Sensors segment.
Item 3.
Legal Proceedings
See discussion of litigation in Note 13 included in Part II, Item 8 of this Annual Report on Form 10-K, which
discussion is incorporated by reference herein.
Item 4.
Mine Safety Disclosures
None.
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information
Our common stock is quoted under the symbol “AXON” on The NASDAQ Stock Market LLC
Holders
As of February 24, 2025, there were 203 holders of record of our common stock.
Dividends
To date, we have not declared or paid cash dividends on our common stock. We do not intend to pay cash dividends
in the foreseeable future.
Issuer Purchases of Equity Securities
In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our
outstanding common stock subject to stock market conditions and corporate considerations. The stock repurchase program
does not have a stated expiration date. During the year ended December 31, 2024, no common shares were purchased
under the program. As of December 31, 2024, $16.3 million remained available under the plan for future purchases.
41
Stock Performance Graph
The following stock performance graph compares the performance of our common stock to the NASDAQ Composite
Index and S&P 500 Index.
The graph covers the period from December 31, 2019 to December 31, 2024. The graph assumes that the value of the
investment in our stock and in each index was $100 at December 31, 2019, and that all dividends were reinvested. We do
not pay dividends on our common stock.
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN
Among Axon Enterprise, Inc., the NASDAQ Composite Index, and the S&P 500 Index
Axon Enterprise, Inc.
NASDAQ Composite
S&P 500
12/31/19
12/31/20
12/31/21
12/31/22
12/31/23
12/31/24
0
100
200
300
400
500
600
700
800
900
2019
2020
2021
2022
2023
2024
Axon Enterprise, Inc.
$
100.00 $
167.21 $
214.25 $
226.41 $
352.44 $
810.73
NASDAQ Composite
100.00
144.92
177.06
119.45
172.77
223.87
S&P 500
100.00
118.40
152.39
124.79
157.59
197.02
Index data copyright NASDAQ and Standard and Poor’s, Inc. Used with permission. All rights reserved.
Item 6.
[Reserved]
42
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to
provide a reader of our consolidated financial statements with a narrative from the perspective of our management on our
financial condition, results of operations, liquidity and certain other factors that may affect our future results. Our MD&A
should be read in conjunction with the other sections of this Annual Report on Form 10-K, including “Part I, Item 1A -
Risk Factors” and “Part II, Item 8 - Financial Statements and Supplementary Data.” The various sections of our MD&A
contain a number of forward-looking statements, all of which are based on our current expectations and could be affected
by the uncertainties and risk factors described throughout this filing. The tables in the MD&A sections below are derived
from exact numbers and may have immaterial rounding differences.
Our MD&A discusses our results of operations for the year ended December 31, 2024 as compared to the year ended
December 31, 2023. For a discussion and analysis of the year ended December 31, 2023 as compared to the year ended
December 31, 2022, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations
included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC
on February 27, 2024.
Overview
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 and safety 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, robotic security and
training solutions. Axon’s growing global customer base includes first responders across international, federal, state, and
local law enforcement, fire, corrections, and emergency medical services, as well as the justice sector, commercial
enterprises, and consumers.
Our revenues for the year ended December 31, 2024 were $2.1 billion, an increase of $521.8 million, or 33.4%, from
the comparable period in the prior year. We had income from operations of $58.5 million, compared to $156.9 million for
the same period in the prior year. Gross margin dollars increased $285.9 million but decreased as a percentage of revenue
to 59.6% from 61.2% compared to the same period in the prior year. The decrease was primarily driven by higher stock-
based compensation expense and amortization of acquired intangibles. Excluding the impacts of stock-based compensation
expense and intangibles amortization in costs of goods sold, adjusted gross margin increased to 63.2% for the year ended
December 31, 2024, compared to 61.8% for the same period in the prior year, primarily due to an increased mix of high-
margin Axon Cloud & Services revenue and investments in TASER automation and cost-reduction initiatives. Operating
expenses increased $384.2 million, reflecting an increase in salaries, benefits, and stock-based compensation expenses, as
well as an increase in professional and consulting expenses related to transaction costs. For the year ended December 31,
2024, we recorded net income of $377.0 million which included net realized and unrealized gains on fair value adjustments
of strategic investments of $162.9 million, a net unrealized gain on marketable securities of $120.3 million, and interest
income, net of $36.6 million. Net income of $175.8 million for the comparable period in the prior year reflected net
unrealized losses of $80.5 million related to impairment and observable price changes for our existing investments and
related warrants, interest income, net of $42.1 million, and a net unrealized gain of $38.7 million on marketable securities.
Certain prior period amounts previously reported on our consolidated financial statements have been revised to
correct for immaterial errors, as described in Note 1, Note 23 and Note 24 included in Part II, Item 8 of this Annual Report
on Form 10-K.
Additionally, in Q1 2025 we approved a plan to realign our business to better reflect our continued growth and
expansion of product, software and service offerings. Previously reported within two reportable segments, TASER and
Software and Sensors, we will prospectively reorganize our business in a manner that provides increased transparency and
distinction between our hardware and software and services components. As a result of the reorganization, effective with
the first quarter of fiscal year 2025, our financial results will be reported in two reportable segments, Connected Devices
and Software & Services, which our CODM will use to regularly review information, allocate resources and assess
performance. Connected Devices will include hardware products, such as CEDs, body cameras, and drones. Software &
Services will include products that integrate with our suite of connected devices, such as Axon Evidence, RMS and other
cloud services.
43
We are currently assessing the impact of this change on our financial reporting and related segment disclosures. We
intend to recast prior period segment information to conform to the new reporting structure, as necessary, to ensure
consistency and comparability across reporting periods.
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 statements of operations (dollars in thousands):
Year Ended December 31,
2024
2023
Net sales from products
$
1,221,292
58.6 % $
964,002
61.8 %
Net sales from services
861,234
41.4
596,697
38.2
Net sales
2,082,526
100.0
1,560,699
100.0
Cost of product sales
618,136
29.7
447,708
28.7
Cost of service sales
223,010
10.7
157,538
10.1
Cost of sales
841,146
40.4
605,246
38.8
Gross margin
1,241,380
59.6
955,453
61.2
Selling, general and administrative
741,247
35.6
494,884
31.7
Research and development
441,593
21.2
303,719
19.5
Total operating expenses
1,182,840
56.8
798,603
51.2
Income from operations
58,540
2.8
156,850
10.0
Interest income, net
36,595
1.8
42,112
2.7
Other income (loss), net
286,369
13.8
(41,901)
(2.7)
Income before provision for income taxes
381,504
18.3
157,061
10.1
Provision for (benefit from) income taxes
4,470
0.2
(18,722)
(1.2)
Net income
$
377,034
18.1 % $
175,783
11.3 %
The following table presents our revenues disaggregated by geography (dollars in thousands):
Year Ended December 31,
2024
2023
United States
$
1,775,194
85 % $
1,335,516
86 %
Other countries
307,332
15
225,183
14
Total
$
2,082,526
100 % $
1,560,699
100 %
International revenue increased as a percentage of revenue compared to the prior year, primarily driven by increased
sales in our Americas region (i.e., Central America, South America, and Canada).
44
Net Sales
Net sales by product line were as follows (dollars in thousands):
Year Ended December 31,
Dollar
Change
Percent
Change
2024
2023
TASER segment:
TASER Devices (Professional)
$
453,055
21.8 % $
333,923
21.4 % $ 119,132
35.7 %
Cartridges
246,766
11.8
193,285
12.4
53,481
27.7
Axon Evidence and Cloud Services
54,913
2.6
35,680
2.3
19,233
53.9
Extended Warranties
37,515
1.8
31,689
2.0
5,826
18.4
Other (1)
26,424
1.3
18,933
1.2
7,491
39.6
TASER segment
818,673
39.3
613,510
39.3
205,163
33.4
Software and Sensors segment:
Axon Evidence and Cloud Services
808,256
38.8
566,003
36.3
242,253
42.8
Axon Body Cameras and Accessories
246,855
11.9
183,023
11.7
63,832
34.9
Axon Fleet Systems
104,890
5.0
121,842
7.8
(16,952)
(13.9)
Extended Warranties
66,141
3.2
55,154
3.5
10,987
19.9
Other (2)
37,711
1.8
21,167
1.4
16,544
78.2
Software and Sensors segment
1,263,853
60.7
947,189
60.7
316,664
33.4
Total net sales
$ 2,082,526 100.0 % $ 1,560,699 100.0 % $ 521,827
33.4 %
(1)
TASER segment “Other” includes smaller categories, such as VR hardware, weapons training revenue such as
revenue associated with our Master Instructor School, and TASER consumer device sales.
(2)
Software and Sensors segment “Other” includes revenue from items including Signal Sidearm, Interview Room,
Axon Air, partners' contra-revenue and other sensors and equipment.
Net sales for the TASER segment for the year ended December 31, 2024 increased $205.2 million, or 33.4%, as
compared to the prior year, primarily due to an increase of $119.1 million in TASER devices and an increase of $53.5
million in cartridge revenue. The increase is primarily related to continued adoption of our newest device, TASER 10. The
increase in revenue from Axon Evidence and cloud services of $19.2 million was driven by an increase in the number of
cloud-connected TASER devices in the field and software revenue tied to our VR solution. An increase in TASER devices
in the field drove the $5.8 million increase in extended warranties, as most of those devices are sold with extended
warranties. The $7.5 million increase in "Other" revenue is primarily driven by increased VR hardware volume.
Net sales for the Software and Sensors segment for the year ended December 31, 2024 increased $316.7 million, or
33.4%, as compared to the prior year, as we continued to add users and associated devices to our network. 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 in Axon Evidence and cloud services revenue of $242.3 million. Axon Body cameras and
accessories revenue increased $63.8 million due to higher unit sales. Partially offsetting the increase was a $17.0 million
decrease in Axon Fleet systems revenue reflecting lower unit volumes on more normalized deployment timelines. An
increase in cameras and docks in the field drove the $11.0 million increase in extended warranties, as most of those devices
are sold with extended warranties. The $16.5 million increase in “Other” revenue was primarily driven by demand for other
product offerings within the Software and Sensors segment.
Gross Margin
As a percentage of net sales, gross margin for the TASER segment decreased to 58.6% from 60.6% for the years
ended December 31, 2024 and 2023, respectively. The decrease was primarily due to increased stock-based compensation
expense. Excluding the impacts of stock-based compensation expense, adjusted gross margin for the TASER segment is
45
62.9% for the year ended December 31, 2024, compared to 60.9% for the same period in 2023. The increase is primarily
due to investments in automation and cost reduction initiatives.
As a percentage of net sales, gross margin for the Software and Sensors segment decreased to 60.2% from 61.6% for
the years ended December 31, 2024 and 2023, respectively. Within the Software and Sensors segment, hardware gross
margin was 37.7% for the year ended December 31, 2024, compared to 45.8% for the same period in 2023. Excluding the
impacts of stock-based compensation expense and amortization of acquired intangible assets, hardware adjusted gross
margin decreased to 41.4% for the year ended December 31, 2024, compared to 46.2% for the same period in 2023
primarily due to product mix and inventory reserve charges associated with legacy products. Service gross margin
increased to 73.0% for the year ended December 31, 2024 compared to 72.6% for the same period in 2023. Excluding the
impacts of stock-based compensation expense and intangibles amortization, service adjusted gross margin increased to
75.8% for the year ended December 31, 2024, compared to 73.6% for the same period in 2023, due to higher software
revenue mix.
For the year ended December 31, 2024, we have seen an increase in stock-based compensation expense within our
cost of goods sold as a result of RSUs granted in January 2024 that generally vest in five annual installments from March
2024 through March 2028. These RSUs were granted to employees whose compensation was under a specified threshold,
including production-line employees. As previously disclosed in Note 15 to our consolidated financial statements included
within our Annual Report on Form 10-K for the year ended December 31, 2023, Patrick W. Smith, our Chief Executive
Officer, agreed to compensation in a lesser amount than the Compensation Committee of our Board of Directors was
otherwise willing to provide so that we could instead provide enhanced compensation opportunities to certain of our other
employees.
Selling, General and Administrative Expenses
SG&A expenses (dollars in thousands):
Year Ended December 31,
Dollar
Change
Percent
Change
2024
2023
Salaries, benefits and bonus
$ 251,139
$ 215,100
$
36,039
16.8 %
Sales and marketing
108,954
91,868
17,086
18.6
Stock-based compensation
190,561
58,533
132,028
225.6
Other
190,593
129,383
61,210
47.3
Total selling, general and administrative expenses
$ 741,247
$ 494,884
$
246,363
49.8 %
SG&A expenses as a percentage of net sales
35.6 %
31.7 %
Salaries, benefits and bonus expense increased $36.0 million in comparison to the prior year, which was primarily
attributable to an increase in headcount and higher wages.
Sales and marketing expense increased $17.1 million in comparison to the prior year, which was primarily
attributable to increased commissions of $12.4 million and an increase of $4.7 million related to in-person events.
Stock-based compensation expense increased $132.0 million in comparison to the prior year, 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.
Other SG&A expenses increased $61.2 million in comparison to the prior year, primarily driven by the following:
•
Professional and consulting expenses increased $21.5 million, primarily driven by transaction costs
related to business acquisitions and strategic investments for Fusus and Dedrone;
•
Travel expenses increased $9.5 million, as a result of increased in-person meetings and lodging costs;
•
Office and building expenses increased $7.1 million relating to building rent and property taxes;
•
Supplies expenses increased $6.7 million primarily due to an increase in computer licenses.
46
Research and Development Expenses
R&D expenses (dollars in thousands):
Year Ended December 31,
Dollar
Change
Percent
Change
2024
2023
Salaries, benefits and bonus
$
233,247
$
178,658
$
54,589
30.6 %
Stock-based compensation
131,954
66,230
65,724
99.2
Other
76,392
58,831
17,561
29.8
Total research and development expenses
$
441,593
$
303,719
$
137,874
45.4 %
R&D expenses as a percentage of net sales
21.2 %
19.5 %
Salaries, benefits, and bonus expense increased $54.6 million in comparison to the prior-year comparable period,
which was primarily attributable to an increase in headcount and higher wages.
Stock-based compensation expense increased $65.7 million which was primarily related to the 2024 Employee XSP
that was approved by shareholders in the 2024 Annual Meeting of Shareholders and increased headcount.
Other R&D expenses increased $17.6 million, primarily related to increased professional and consulting expenses
related to the launch of new products of $6.6 million, and increased internal cloud storage and service costs related to
software product development of $3.9 million.
Interest Income, Net
Interest income, net, was as follows (in thousands):
Year Ended December 31,
2024
2023
Interest income
$
43,693 $
49,107
Interest expense
(7,098)
(6,995)
Total interest income, net
$
36,595 $
42,112
The decrease in interest income for the year ended December 31, 2024 is primarily related to lower balances of
available-for-sale securities during the year. There were no material changes in interest expense for the year ended
December 31, 2024 when compared against the prior comparable period.
Other Income (Loss), Net
Other income (loss), net, was as follows (in thousands):
Year Ended December 31,
2024
2023
Realized and unrealized gain (loss) on fair value adjustments of strategic investments,
net
$
162,887 $
(80,485)
Unrealized gain on marketable securities, net
120,330
38,700
Gain (loss) on foreign currency transactions, net
3,463
(504)
Other, net
(311)
388
Other income (loss), net
$
286,369 $
(41,901)
In 2024, we recorded a realized gain of $93.9 million related to acquiring the remaining outstanding equity interests
of two previously held strategic investments and an unrealized gain of $75.6 million related to an observable price change
for an existing strategic investment and related warrants. The increase in unrealized gain on marketable securities for the
year ended December 31, 2024 is driven by fair value changes for our existing marketable securities.
47
In 2023, we recorded a net unrealized impairment loss of $71.9 million for an existing strategic investment and
related warrants and an unrealized loss of $8.6 million related to observable price changes for our existing investments and
related warrants.
Provision for Income Taxes
The effective tax rate was 1.2% for the year ended December 31, 2024, compared to (11.9)% for the year ended
December 31, 2023. The increase in the effective tax rate is primarily driven by higher pre-tax income, which reduced the
relative impact of favorable tax adjustments. The increase in current year rate is primarily driven by a lesser percentage of
allowable stock based compensation adjustment in comparison to pre-tax book income. Additionally, the R&D credit was a
lesser percentage of pretax income which was offset by the reversal of nontaxable gain on investments.
Provision for income taxes were as follows (dollars in thousands):
Year Ended December 31,
2024
2023
Change
Pre-tax income
$
381,504
$
157,061
$
224,443
Provision for (benefit from) income taxes
4,470
(18,722)
23,192
Effective tax rate
1.2 %
(11.9) %
13.1 %
Net Income
We recorded net income of $377.0 million for the year ended December 31, 2024 compared to a net income of
$175.8 million in 2023. Net income per basic share was $4.98 and diluted net income per share was $4.80 for 2024,
compared to net income per basic share of $2.37 and diluted net income per share of $2.33 for 2023.
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. Beginning with our first fiscal
quarter of 2024, we have added adjusted gross margin to our non-GAAP financial measures. We have adjusted for
expenses that we believe are not indicative of our core operating results. To improve comparability, prior periods have been
conformed to the current period presentation. We use 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 and marketable securities; transaction and
integration costs related to strategic investments and acquisitions including adjustments related to the foreign
currency impact of acquired intercompany balances that were unsettled as of the reporting date and plan to be
settled in the near term; 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.
48
Although these non-GAAP financial measures are not consistent with GAAP, we believe 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 Annual Report on Form 10-K were prepared
under a comprehensive set of rules or principles.
EBITDA and Adjusted EBITDA reconcile to net income as follows (in thousands):
Year Ended December 31,
2024
2023
Net income
$
377,034 $
175,783
Depreciation and amortization
56,815
32,638
Interest expense
7,098
6,995
Investment interest income
(43,693)
(49,107)
Provision for (benefit from) income taxes
4,470
(18,722)
EBITDA
$
401,724 $
147,587
Non-GAAP adjustments:
Stock-based compensation expense
382,604
131,358
Unrealized (gain) loss on strategic investments and marketable securities, net
(192,067)
41,785
Realized gain on previously held minority interest, net
(91,150)
—
Transaction and integration costs related to strategic investments and acquisitions
15,249
4,501
Loss on disposal, abandonment, and impairment of property, equipment and
intangible assets, net
—
317
Loss recoveries
—
(3,404)
Inventory step-up amortization
609
—
Litigation costs and related recoveries
1,761
241
Payroll taxes related to 2019 XSPP vesting and 2018 CEO Performance Award
option exercises
2,645
9,011
Adjusted EBITDA
$
521,375 $
331,396
49
Adjusted gross margin reconciles to gross margin as follows (in thousands):
For the year ended December 31, 2024
For the year ended December 31, 2023
TASER
Software
and Sensors
Total
TASER
Software
and Sensors
Total
Gross margin
480,031
761,349
1,241,380
371,533
583,920
955,453
Stock-based compensation expense
34,906
25,183
60,089
2,234
4,361
6,595
Amortization of acquired intangible assets
31
13,338
13,369
1
3,143
3,144
Inventory step-up amortization
—
609
609
—
—
—
Adjusted gross margin
$ 514,968
$ 800,479
$ 1,315,447
$ 373,768
$ 591,424
$ 965,192
Gross margin
58.6 %
60.2 %
59.6 %
60.6 %
61.6 %
61.2 %
Adjusted gross margin
62.9 %
63.3 %
63.2 %
60.9 %
62.4 %
61.8 %
Liquidity and Capital Resources
Summary
December 31,
2024
December 31,
2023
Dollar Change
Cash and cash equivalents
$
454,844 $
598,545 $
(143,701)
Available-for-sale investments
333,235
644,054
(310,819)
Total
$
788,079 $
1,242,599 $
(454,520)
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 December 31, 2024, we had $454.8 million of cash and cash
equivalents, a decrease of $143.7 million from December 31, 2023. Refer below for further discussions related to the
change in cash and cash equivalents. As of December 31, 2024, we had $333.2 million of available-for-sale investments, a
decrease of $310.8 million from December 31, 2023 primarily as a result of the natural maturity of short term investments
reinvested into cash and cash equivalents until utilized for our acquisition activity in the period.
In addition, our revolving credit facility (the "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 $200.0 million, $30.0 million of which is available for the issuance of letters of
credit. As of December 31, 2024, and 2023, respectively, no amounts were drawn under the Credit Agreement. Under the
terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of December 31, 2024, we
had letters of credit outstanding of approximately $7.8 million under the facility and available borrowing of $192.2 million.
Refer to Note 12 in Part II, Item 8 of this Annual Report on Form 10-K for additional details related to our Credit
Agreement and outstanding letters of credit.
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. We and our Board of Directors may consider repurchases of our common stock. Further
repurchases of our common stock would take place on the open market, would be financed with available cash and are
subject to authorization as well as market and business conditions.
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 (including our 2027 Notes) 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.
50
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities (in thousands):
Year Ended December 31,
Dollar
Change
2024
2023
Operating activities
$
408,312 $
189,263 $
219,049
Investing activities
(490,573)
12,476
(503,049)
Financing activities
(45,437)
41,314
(86,751)
Effect of exchange rate changes on cash and cash equivalents
(6,209)
2,065
(8,274)
Net increase (decrease) in cash and cash equivalents and restricted
cash
$
(133,907) $
245,118 $
(379,025)
Operating activities
Year Ended December 31,
Dollar
Change
2024
2023
Net income
$
377,034 $
175,783 $
201,251
Stock-based compensation
382,604
131,358
251,246
Fair value adjustments on strategic investments and marketable
securities, net
(283,217)
41,785
(325,002)
Deferred income taxes
(85,096)
(72,497)
(12,599)
Inventory and accounts payable
55,126
(12,297)
67,423
Receivables and contract assets
(245,842)
(178,989)
(66,853)
Deferred revenue
155,641
146,819
8,822
Other, net
52,062
(42,699)
94,761
Net cash provided by (used in) operating activities
$
408,312 $
189,263 $
219,049
Net cash provided by operating activities in 2024 of $408.3 million consisted of $377.0 million in net income, a net
add-back of non-cash income statement items totaling $104.0 million and a $72.7 million net change in operating assets
and liabilities. Included in the non-cash items were $382.6 million in stock-based compensation expense, $283.2 million in
fair value adjustments for the realized and unrealized gains (losses) on our strategic investments and marketable securities,
$48.4 million in depreciation and amortization expense and $85.1 million in deferred income taxes. The change in fair
value adjustments on strategic investments and marketable securities was primarily driven by the realized gains on the
acquisition of two previously held strategic investments, an observable price change for an existing strategic investment
and related warrants, and fair value gains for our marketable securities. The change in receivables and contract assets was
largely attributable to increased sales in 2024, particularly for sales made under subscription plans. 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 R&D capitalization and additional GAAP expense for unvested stock-
based compensation, partially offset by non-taxable unrealized net investment gains.
Investing activities
Net cash used in investing activities was $490.6 million for the year ended December 31, 2024 compared to cash
provided by investing activities of $12.5 million for the comparable period in the prior year. The net investing cash outflow
is driven by $621.8 million related to acquiring two previously held strategic investments, $113.4 million for strategic
investments, and $78.8 million for purchases of property and equipment, net of proceeds, partially offset by $1.0 billion of
proceeds from calls, maturities and sales of available-for-sale investments, less purchases of $680.0 million. This net cash
outflow is primarily driven by greater acquisition and strategic investment activities in the current period, when contrasted
with the prior comparable period.
51
Financing activities
Net cash used in financing activities was $45.4 million for the year ended December 31, 2024, compared to cash
provided by financing activities of $41.3 million for the comparable period in the prior year. The net financing cash
outflow in the current period is driven by the payment of income and payroll taxes on behalf of employees who net-settled
stock awards during the period, whereas the net financing cash inflow in the prior comparable period was primarily driven
by net proceeds from our ATM offering and cash received from the exercise of stock options where shares were sold to
cover the exercise price, partially offset by the payment of income and payroll taxes on behalf of employees who net-
settled stock awards during the period.
Contractual Obligations
The following table outlines our future contractual financial obligations by period in which payment is expected, as of
December 31, 2024 (in thousands):
Total
Short
Term
Long
Term
Operating lease obligations
$
69,466 $
13,791 $
55,675
Purchase obligations
909,675
504,270
405,405
Principal and interest payable on our convertible senior notes
699,996
3,383
696,613
Total contractual obligations
$
1,679,137 $
521,444 $
1,157,693
Operating lease obligations include operating leases for office space, manufacturing and logistical functions,
discussed further within Note 18 in Part II, Item 8 of this Annual Report on Form 10-K. We regularly evaluate our real
estate needs to identify opportunities to reduce long-term cash requirements where practicable.
Purchase obligations include both open purchase orders and other purchase commitments, discussed further within
Note 13 in Part II, Item 8 of this Annual Report on Form 10-K. The open purchase orders represent both cancellable and
non-cancellable purchase orders with key vendors, which are included in this table due to our strategic relationships with
these vendors.
In December 2022, we issued $690.0 million aggregate principal amount of our 2027 Notes (the "Notes") in a private
offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to
an additional $90.0 million principal amount of the Notes. The Notes mature on December 15, 2027 and bear interest at a
fixed rate of 0.50% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on
June 15, 2023. On or after December 22, 2025, we may redeem for cash all or any portion of the notes in accordance with
the optional redemption terms of the convertible debt agreement. For additional details, refer to Note 12 in Part II, Item 8 of
this Annual Report on Form 10-K.
Obligations related to our uncertain tax positions have been excluded from the table above because of the uncertainty
surrounding the timing and final amounts of any settlement. For additional details, refer to Note 14 in Part II, Item 8 of this
Annual Report on Form 10-K.
Critical Accounting Estimates
We have identified the following accounting estimates as critical to our business operations and the understanding of
our results of operations. The preparation of this Annual Report on Form 10-K requires us to make estimates and
assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the
date of our consolidated financial statements, and the reported amounts of revenue and expenses during the reporting
period. While we do not believe that a significant change in these estimates is reasonably likely, there can be no assurance
that our actual results will not differ from these estimates.
Inventory
Inventories are stated at lower of cost and net realizable value, using a standard cost method which approximates the
first-in, first-out method. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their net
realizable value. These provisions are based on our best estimate after considering historical demand, projected future
52
demand, inventory purchase commitments, industry and market trends, and a variety of other factors. Changes in these
underlying assumptions can materially affect our provisions and the resulting net realizable value of our inventories. For
additional discussion, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
Revenue Recognition
We derive revenue from two primary sources: (1) the sale of physical products, including CEDs, Axon cameras,
Axon Signal-enabled devices, corresponding hardware extended warranties, and related accessories such as Axon docks,
cartridges and batteries, among others, and (2) subscriptions to our Axon Evidence digital evidence management SaaS
offering (including data storage fees and other ancillary services), which includes varying levels of support. To a lesser
extent, we also recognize revenue from training, professional services and other software and SaaS services. We apply the
five-step model outlined in ASC 606, as discussed further in Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the
unit of account in ASC 606. For contracts with multiple performance obligations, we allocate the contract transaction price
to each performance obligation using our estimate of the standalone selling price (“SSP”) of each distinct good or service
in the contract. Revenues are recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration we expect to receive in exchange for those products or services. Revenue is
recognized net of allowances for returns. For additional discussion, refer to Note 2 in Part II, Item 8 of this Annual Report
on Form 10-K.
We determine the term of our arrangements based on identifying the contract with the customer. In certain of our
arrangements, the customer may have termination rights. In these instances, we determine if there is a substantive penalty.
For contracts with a substantive penalty, the accounting term will be the legal contract term, inclusive of the periods for
which the customer termination rights exist. In these contracts with no substantive penalty, we also consider if the option
for our customer to purchase additional goods or services represents an additional performance obligation in the form of a
material right.
The timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an
unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset
when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized
subsequent to invoicing. For additional discussion, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
Valuation of Goodwill, Intangible and Long-lived Assets
We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of
long-lived assets and identifiable intangible assets, excluding goodwill and intangible assets with indefinite useful lives,
may warrant revision or that the remaining balance of these assets may not be recoverable. Such circumstances could
include a change in the product mix, a change in the way products are created, produced or delivered, or a significant
change in the way products are branded and marketed. In performing the review for recoverability, we estimate the future
undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The amount of the
impairment loss, if impairment exists, is calculated based on the excess of the carrying amounts of the assets over their
estimated fair values computed using discounted cash flows. As such, the key inputs into this analysis are inherently
subject to uncertainty and require significant judgments to be made.
Finite-lived intangible assets and other long-lived assets are amortized over their estimated useful lives. We do not
amortize goodwill and intangible assets with indefinite useful lives; rather such assets are tested for impairment at least
annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. In performing
our annual impairment assessments for goodwill and indefinite-lived intangible assets, we consider a variety of factors
including (1) events impacting the carrying value or composition of a reporting unit or asset group, respectively, (2)
changes in the macroeconomic environment, (3) adverse changes in our financial performance, (4) industry and market
conditions, among others. Any significant changes in these underlying assumptions may significantly affect our
impairment conclusions and net book value of corresponding assets in our consolidated financial statements. Based on our
annual impairment assessments in the fourth quarter of 2024, no goodwill or indefinite-lived intangible asset impairment
was indicated. For additional details, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
53
Income Taxes
We recognize federal, state and foreign current tax liabilities or assets based on our estimate of taxes payable or
refundable in the current fiscal year by tax jurisdiction. We also recognize federal, state and foreign deferred tax assets or
liabilities, as appropriate, for our estimate of future tax effects attributable to temporary differences and carry forwards.
Our calculation of current and deferred tax assets and liabilities is based on certain estimates and judgments and
involves dealing with uncertainties in the application of complex tax laws. Our estimates of current and deferred tax assets
and liabilities may change based, in part, on added certainty or finality to an anticipated outcome, changes in accounting or
tax laws domestically and internationally, or changes in other facts or circumstances.
Deferred tax assets are required to be reduced by a valuation allowance if it is more likely than not that some portion
or all of the net deferred tax assets will not be realized. In evaluating our ability to recover our deferred income tax assets,
we consider all available positive and negative evidence, including our operating results, the future reversals of deferred tax
liabilities, forecast of future taxable income and available tax planning strategies that could be implemented to realize the
net deferred tax assets. Failure to achieve forecasted taxable income can affect the realization of net deferred tax assets. We
exercise significant judgment in determining our provision for income taxes, our deferred income tax assets and liabilities,
and our future taxable income for purposes of assessing our ability to utilize any future tax benefit from our deferred
income tax assets.
We operate in multiple tax jurisdictions and are subject to audit in these jurisdictions, generally years after our returns
are filed. These returns could be subject to material adjustments or differing interpretations of the tax laws. We record
uncertain tax positions when it has been determined that it is more-likely-than-not that a tax position will not be sustained
upon examination by taxing authorities based on the technical merits of the position. We use the criteria established in the
accounting guidance to determine whether an item meets the definition of more-likely-than-not. The Company’s policy is
to recognize these uncertain tax positions when the more-likely than-not threshold is met, when the statute of limitations
has expired or upon settlement. Changes in assessments may result in income tax benefit or additional expense in our
consolidated financial statements. For additional details, refer to Note 14 in Part II, Item 8 of this Annual Report on Form
10-K.
Stock-Based Compensation
We have historically utilized stock-based compensation for key employees and non-employee directors as a means of
attracting and retaining talented personnel. We recognize compensation expense for our stock-based compensation
program, which includes grants of service-based restricted stock units (“RSUs”), performance-based restricted stock units
(“PSUs”), and performance-based stock options (“stock options”).
Vesting of performance stock units is contingent upon the achievement of certain performance criteria including,
successful and timely development and market acceptance of future product introductions and ongoing market
performance, among others. Compensation expense for performance awards is recognized based on our best estimate of the
probability of the performance criteria being satisfied using the most currently available projections, adjusted at each
balance sheet date.
Our performance-based restricted stock units include eXponential stock units (“XSUs”) granted under the Axon
Enterprise, Inc. 2024 Employee eXponential Stock Plan (the “2024 Employee XSP”) and the 2024 CEO Performance
Award discussed further in Note 1 in Part II, Item 8 of this Annual Report. Stock-based compensation expense associated
with the 2024 XSU awards is recognized over the requisite service period, which is considered the longest explicit, implicit
or derived service period for each respective tranche. We utilized Monte Carlo simulations to evaluate a range of possible
future stock price goals over the term of the awards at each of the respective grant dates, the median of which was used as
the basis for the derived service period for each tranche. Furthermore, we measured the grant date fair value of each tranche
utilizing a Monte Carlo simulation which considered various assumptions, including expected volatility and an illiquidity
discount. This simulation is based on a subjective assessment of our forward-looking financial projections, taking into
consideration statistical analysis. There is significant judgment required to determine the requisite service period, grant date
fair value, and probability of the performance criteria being satisfied. Changes in the subjective and probability-based
assumptions can materially affect the estimates of the fair value of the awards and timing of recognition of stock-based
compensation and consequently, the related amount recognized in our consolidated statements of operations and
comprehensive income. For additional details, refer to Note 1 and Note 16 in Part II, Item 8 of this Annual Report on Form
10-K.
54
Contingencies and Accrued Litigation Expense
We are subject to the possibility of various loss contingencies arising in the ordinary course of business, including
product-related and other litigation. We consider the likelihood of loss or impairment of an asset or the incurrence of a
liability, as well as our ability to reasonably estimate the amount of loss in determining loss contingencies. An estimated
loss contingency is accrued when it is probable that an asset has been impaired or a liability has been incurred and the
amount of loss can be reasonably estimated. We regularly evaluate current information available to us to determine whether
such accruals should be adjusted and whether new accruals are required. We do not believe any currently identified claims
or litigation will materially affect our financial condition, results of operations or cash flows. However, litigation is subject
to inherent uncertainties. If an unfavorable ruling were to occur, it may cause a material adverse impact on the financial
condition, results of operations or cash flows for the period in which the ruling occurs, or future periods. For additional
details, refer to Note 13 in Part II, Item 8 of this Annual Report on Form 10-K.
Strategic Investments
We have strategic investments which include equity and debt investments in a number of non-public technology
driven companies. The strategic investments are generally accounted for under the ASC 321 measurement alternative for
equity securities without readily determinable fair values, as there are no quoted market prices for the equity investments.
Accordingly, the equity investments will be carried at cost less impairment. These investments will be subsequently
remeasured to fair value upon observable price changes in an orderly transaction for the identical or similar investments.
Additionally, if a qualitative assessment identifies impairment indicators, then the equity investments must be evaluated for
impairment and written down to fair value in the event carrying value exceeds fair value. The debt strategic investment and
the associated embedded derivatives are accounted for utilizing the fair value option and remeasured through earnings on a
periodic basis. For additional details relating to our valuation techniques, refer to Note 1 and Note 8 in Part II, Item 8 of
this Annual Report on Form 10-K.
Business Combinations
When we acquire a business, we allocate the purchase consideration to the liabilities assumed, intangible assets and
other assets acquired based on their estimated respective fair values. The excess of the fair value of purchase consideration
over the fair values of these identifiable assets and liabilities is recorded as goodwill. Additionally, in step acquisitions in
which we acquire incremental equity interests that provide us control of a business, the previously held equity interest is
remeasured to fair value at the date the controlling interest is acquired.
Critical estimates used in valuing certain acquired intangible assets include, but are not limited to, significant
assumptions with respect to time and resources required to recreate the assets acquired, actual and forecasted cash flows,
long-term growth rates, market royalty rates, and discount rates associated, amongst other factors. The values and estimated
useful lives assigned to intangible assets acquired in business combinations impact the amount and timing of future
amortization expense. Remeasurement of previously held equity interests to fair value is also dependent on these estimates.
Our estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and
unpredictable and, as a result, actual results may vary. For additional details, refer to Note 21 in Part II, Item 8 of this
Annual Report on Form 10-K.
55
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
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 December 31, 2024, 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. For
additional details, refer to Note 1 in Part II, Item 8 of this Annual Report on Form 10-K.
Additionally, we have access to a $200.0 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 $7.8 million at December 31, 2024. At December 31, 2024, there was no amount outstanding under
the line of credit, and the available borrowing under the line of credit was $192.2 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.
There have been no other material changes in our primary risk exposures or management of risks since the prior year.
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.
There have been no other material changes in our primary risk exposures or management of risks since the prior year.
56
Item 8.
Financial Statements and Supplementary Data
Index to Consolidated Financial Statements
Page
Consolidated Balance Sheets as of December 31, 2024 and 2023
58
Consolidated Statements of Operations and Comprehensive Income (Loss) for the years ended December 31, 2024, 2023, and 2022
62
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2024, 2023, and 2022
63
Consolidated Statements of Cash Flows for the years ended December 31, 2024, 2023, and 2022
61
Notes to Consolidated Financial Statements
62
Report of PricewaterhouseCoopers LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 238)
103
Report of Grant Thornton LLP, Independent Registered Public Accounting Firm (PCAOB ID No. 248)
105
57
AXON ENTERPRISE, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
December 31,
2024
December 31,
2023
ASSETS
Current assets:
Cash and cash equivalents
$
454,844
$
598,545
Marketable securities
198,270
77,940
Short-term investments
333,235
644,054
Accounts and notes receivable, net of allowance of $3,322 and $2,392 as of December 31, 2024 and
December 31, 2023, respectively
547,572
412,961
Contract assets, net
367,929
287,232
Inventory
265,316
269,855
Prepaid expenses and other current assets
130,315
103,055
Total current assets
2,297,481
2,393,642
Property and equipment, net
247,324
200,533
Deferred tax assets, net
304,282
227,784
Intangible assets, net
175,157
19,539
Goodwill
756,838
57,945
Long-term notes receivable, net
3,460
2,588
Long-term contract assets, net
119,876
84,382
Strategic investments
332,550
231,730
Other long-term assets
237,620
191,031
Total assets
$
4,474,588
$
3,409,174
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable
$
71,955
$
65,852
Accrued liabilities
279,193
193,550
Current portion of deferred revenue
612,955
470,415
Customer deposits
20,626
21,935
Other current liabilities
12,857
9,787
Total current liabilities
997,586
761,539
Deferred revenue, net of current portion
360,685
270,901
Liability for unrecognized tax benefits
25,007
18,049
Long-term deferred compensation
15,877
11,342
Long-term lease liabilities
41,383
33,550
Convertible notes, net
680,289
677,113
Other long-term liabilities
26,096
20,915
Total liabilities
2,146,923
1,793,409
Commitments and contingencies (Note 13)
Stockholders’ equity:
Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of
December 31, 2024 and December 31, 2023, respectively
—
—
Common stock, $0.00001 par value; 200,000,000 shares authorized, 96,839,558 shares issued and
76,619,331 shares outstanding as of December 31, 2024, and 200,000,000 shares authorized, 95,521,651
shares issued and 75,301,424 shares outstanding as of December 31, 2023
1
1
Additional paid-in capital
1,689,781
1,347,410
Treasury stock at cost, 20,220,227 shares as of December 31, 2024 and December 31, 2023
(155,947)
(155,947)
Retained earnings
812,014
434,980
Accumulated other comprehensive loss
(18,184)
(10,679)
Total stockholders’ equity
2,327,665
1,615,765
Total liabilities and stockholders’ equity
$
4,474,588
$
3,409,174
The accompanying notes are an integral part of these consolidated financial statements.
58
AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except per share data)
For the Years Ended December 31,
2024
2023
2022
Net sales from products
$
1,221,292 $
964,002 $
797,177
Net sales from services
861,234
596,697
389,966
Net sales
2,082,526
1,560,699
1,187,143
Cost of product sales
618,136
447,708
360,909
Cost of service sales
223,010
157,538
100,121
Cost of sales
841,146
605,246
461,030
Gross margin
1,241,380
955,453
726,113
Operating expenses:
Selling, general and administrative
741,247
494,884
399,330
Research and development
441,593
303,719
233,810
Total operating expenses
1,182,840
798,603
633,140
Income from operations
58,540
156,850
92,973
Interest income, net
36,595
42,112
4,294
Other income (loss), net
286,369
(41,901)
98,971
Income before provision for income taxes
381,504
157,061
196,238
Provision for (benefit from) income taxes
4,470
(18,722)
49,308
Net income
$
377,034 $
175,783 $
146,930
Net income per common and common equivalent shares:
Basic
$
4.98 $
2.37 $
2.07
Diluted
$
4.80 $
2.33 $
2.03
Weighted average number of common and common equivalent
shares outstanding:
Basic
75,748
74,195
71,093
Diluted
78,558
75,456
72,534
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Net income
$
377,034 $
175,783 $
146,930
Foreign currency translation adjustments
(7,874)
(4,352)
(4,818)
Unrealized gain (loss) on available-for-sale investments
369
852
(1,044)
Comprehensive income
$
369,529 $
172,283 $
141,068
The accompanying notes are an integral part of these consolidated financial statements.
59
AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except share data)
Common Stock
Additional
Paid-in
Capital
Treasury Stock
Retained
Earnings
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders’
Equity
Shares
Amount
Shares
Amount
Balance, December 31, 2021
70,896,856
$
1
$ 1,095,229
20,220,227
$ (155,947) $
112,267
$
(1,317) $
1,050,233
Issuance of common stock
—
—
(74)
—
—
—
—
(74)
Issuance of common stock under employee
plans, net
566,780
—
(4,870)
—
—
—
—
(4,870)
Stock-based compensation
—
—
106,176
—
—
—
—
106,176
Issuance of common stock for business
combination contingent consideration
10,945
—
—
—
—
—
—
—
Tax benefit related to convertible note hedge
—
—
48,858
—
—
—
—
48,858
Purchase of convertible note hedge
—
—
(194,994)
—
—
—
—
(194,994)
Issuance of warrants
—
—
124,269
—
—
—
—
124,269
Net income
—
—
—
—
—
146,930
—
146,930
Other comprehensive loss, net
—
—
—
—
—
—
(5,862)
(5,862)
Balance, December 31, 2022
71,474,581
$
1
$ 1,174,594
20,220,227
$ (155,947) $
259,197
$
(7,179) $
1,270,666
Issuance of common stock
467,594
—
94,705
—
—
—
—
94,705
Issuance of common stock under employee
plans, net
1,441,279
—
(107,894)
—
—
—
—
(107,894)
Stock options exercised
1,907,026
—
54,503
—
—
—
—
54,503
Stock-based compensation
—
—
131,358
—
—
—
—
131,358
Issuance of common stock for business
combination contingent consideration and
related tax effects
10,944
—
144
—
—
—
—
144
Net income
—
—
—
—
—
175,783
—
175,783
Other comprehensive loss, net
—
—
—
—
—
—
(3,500)
(3,500)
Balance, December 31, 2023
75,301,424
$
1
$ 1,347,410
20,220,227
$ (155,947) $
434,980
$
(10,679) $
1,615,765
Issuance of common stock under employee
plans, net
804,780
—
(58,178)
—
—
—
—
(58,178)
Stock options exercised
510,000
—
14,576
—
—
—
—
14,576
Stock-based compensation
—
—
382,604
—
—
—
—
382,604
Issuance of common stock for business
combination contingent consideration and
related tax effects
3,127
—
498
—
—
—
—
498
Issuance of replacement awards in connection
with business combinations
—
—
2,871
—
—
—
—
2,871
Net income
—
—
—
—
—
377,034
—
377,034
Other comprehensive loss, net
—
—
—
—
—
—
(7,505)
(7,505)
Balance, December 31, 2024
76,619,331
$
1
$ 1,689,781
20,220,227
$ (155,947) $
812,014
$
(18,184) $
2,327,665
The accompanying notes are an integral part of these consolidated financial statements.
60
AXON ENTERPRISE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
For the Years Ended December 31,
2024
2023
2022
Cash flows from operating activities:
Net income
$
377,034
$
175,783
$
146,930
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock-based compensation
382,604
131,358
106,176
(Gain) loss on strategic investments and marketable securities, net
(283,217)
41,785
(98,943)
Depreciation and amortization
48,425
19,315
23,116
Provision for bad debts and inventory
20,073
5,484
701
Deferred income taxes
(85,096)
(72,497)
22,019
Other noncash items
21,177
12,853
16,031
Change in assets and liabilities:
Receivables and contract assets
(245,842)
(178,989)
(78,226)
Inventory
607
(77,626)
(95,011)
Deferred revenue
155,641
146,819
155,566
Accounts payable, accrued and other liabilities
54,519
65,329
80,978
Prepaid expenses and other assets
(37,613)
(80,351)
(43,976)
Net cash provided by operating activities
408,312
189,263
235,361
Cash flows from investing activities:
Purchases of investments
(793,419)
(563,680)
(845,179)
Business combinations, net of cash acquired
(621,817)
(21,090)
(2,104)
Proceeds from call, maturity, and sale of investments
1,003,394
657,418
72,138
Purchases of property and equipment
(78,785)
(59,635)
(55,802)
Other, net
54
(537)
(20)
Net cash (used in) provided by investing activities
(490,573)
12,476
(830,967)
Cash flows from financing activities:
Net proceeds from equity offering
—
94,705
(74)
Proceeds from options exercised
14,576
54,503
—
Income and payroll tax payments for net-settled stock awards
(58,178)
(107,894)
(4,870)
Net proceeds from issuance of convertible senior notes
—
—
673,769
Proceeds from issuance of warrants
—
—
124,269
Purchase of convertible note hedge
—
—
(194,994)
Other, net
(1,835)
—
—
Net cash (used in) provided by financing activities
(45,437)
41,314
598,100
Effect of exchange rate changes on cash and cash equivalents
(6,209)
2,065
(3,380)
Net increase (decrease) in cash and cash equivalents
(133,907)
245,118
(886)
Cash and cash equivalents and restricted cash, beginning of period
600,670
355,552
356,438
Cash and cash equivalents and restricted cash, end of period
$
466,763
$
600,670
$
355,552
Supplemental disclosures:
Cash and cash equivalents
$
454,844
$
598,545
$
353,684
Restricted cash (Note 1)
11,919
2,125
1,868
Total cash, cash equivalents and restricted cash shown in the statements of cash flows
$
466,763
$
600,670
$
355,552
Cash paid for interest
$
3,450
$
3,508
$
—
Cash paid for income taxes, net of refunds
67,845
64,492
10,508
Non-cash transactions
Property and equipment purchases in accounts payable and accrued liabilities
$
5,157
$
238
$
1,056
Non-cash equity issuances related to business combinations
2,871
—
—
The accompanying notes are an integral part of these consolidated financial statements.
61
Note 1 - Organization and Summary of Significant Accounting Policies
Axon Enterprise, Inc. (“Axon”, the “Company”, “we” or “us”) is a market-leading provider of public safety
technology solutions. Our mission is to protect life in service of promoting peace, justice and strong institutions.
The accompanying consolidated financial statements include the accounts of Axon Enterprise, Inc. and our
subsidiaries. All intercompany accounts, transactions and profits have been eliminated.
Basis of Presentation and Use of Estimates
The accompanying consolidated financial statements have been prepared in conformity with accounting principles
generally accepted in the United States of America (“GAAP”). The preparation of these consolidated financial statements
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Significant estimates and assumptions in these consolidated financial
statements include:
•
revenue recognition,
•
stock-based compensation,
•
business combinations,
•
inventory valuation and related reserves,
•
valuation of goodwill, intangible and long-lived assets,
•
valuation of strategic investments,
•
recognition, measurement and valuation of current and deferred income taxes, and
•
recognition and measurement of contingencies and accrued litigation expense.
We believe that estimates used in the preparation of these consolidated financial statements are reasonable; however,
actual results could differ materially from those estimates.
Revision of Previously Issued Financial Statements
In preparing the condensed consolidated financial statements as of September 30, 2024, we identified errors in our
previously issued financial statements related to our historical conclusions of principal vs. agent accounting of certain
reseller arrangements under ASC 606. The identified errors impacted our previously issued 2021 and 2022 annual financial
statements, 2023 quarterly and annual financial statements, and 2024 quarterly financial statements through June 30, 2024.
We have made adjustments to correct the prior period amounts presented in these financial statements accordingly.
Furthermore, we have made adjustments to correct for other previously identified immaterial errors.
We assessed the materiality of the errors on prior period consolidated financial statements in accordance with SEC
Staff Accounting Bulletin No. 99, "Materiality," codified in ASC 250, Accounting Changes and Error Corrections. Based
on this assessment, we concluded that the error correction is not material to any previously issued interim or annual
financial statements on either a quantitative or qualitative basis. A summary of the revisions to the previously reported
financial information is included in Note 23 and Note 24.
Out of Period Adjustment
During the 2024 year-end close process, we identified immaterial errors in our previously issued financial statements
related to accounting for certain contract terms and conditions in accordance with ASC 606. We assessed the materiality of
the errors in combination with the errors described above on prior period consolidated financial statements in accordance
with SEC Staff Accounting Bulletin No. 99, “Materiality,” codified in ASC Topic 250, Accounting Changes and Error
Corrections and concluded that the errors are not material, individually and in the aggregate, to any previously issued
financial statements and that the correction of this misstatement in 2024 was also not material to the current fiscal year on
either a quantitative or qualitative basis. We corrected these errors as an out of period adjustment during the year ended
December 31, 2024 with a decrease to revenue of $3.3 million and a decrease to net income of $2.3 million. These errors
originated in prior years and were immaterial to each respective prior period.
62
Concentration of Credit Risk
Financial instruments that potentially subject us to concentrations of credit risk consist of accounts and notes
receivable, contract assets and cash. Historically, we have experienced an immaterial level of write-offs related to
uncollectible accounts.
We hold the majority of our cash and cash equivalents accounts at two depository institutions. As of December 31,
2024, the aggregate balances in such accounts were $376.8 million. Our balances with these two institutions regularly
exceed Federal Deposit Insurance Corporation insured limits for domestic deposits and various deposit insurance programs
in countries such as Australia, Belgium, Canada, Finland, France, Germany, Greece, India, Italy, the Netherlands, Spain,
the United Kingdom and Vietnam. To manage the related credit exposure, management continually monitors the
creditworthiness of the financial institutions where we have deposits.
Major Customers and Suppliers
No customer represented more than 10% of total net sales for the years ended December 31, 2024, 2023 or 2022. At
December 31, 2024 and 2023, no customer represented more than 10% of the aggregate balance of accounts and notes
receivable and contract assets. For additional details, refer to Note 2.
We currently purchase both off-the-shelf and custom components, including finished circuit boards, injection-molded
plastic components, small machined parts, custom cartridge components, electronic components and sub-assemblies from
suppliers located in the United States, Taiwan, Mexico, China, Vietnam, Thailand and the Republic of Korea. We may
source from other countries as well. Although we currently obtain components from single source suppliers, we own
substantially all injection-molded component tooling, designs and test fixtures used in production for all custom
components. As a result, we believe we could obtain alternative suppliers in most cases. We acquire most of our
components on a purchase order basis and do not currently have significant long-term purchase contracts with most
component suppliers.
Segment Information
Our operations comprise two reportable segments: the development, manufacture and sale of fully integrated
hardware and cloud-based software solutions that enable law enforcement to capture, securely store, manage, share and
analyze video and other digital evidence (collectively, the ‘Software and Sensors” segment); and the manufacture and sale
of CEDs, batteries, accessories, extended warranties and other products and services (collectively, the “TASER” segment).
In both segments, we report sales of products and services. Service revenue in both segments includes sales related to Axon
Evidence. In the Software and Sensors segment, service revenue also includes other recurring cloud-hosted software
revenue and related professional services. Collectively, this revenue is sometimes referred to as “Axon Cloud revenue.”
Reportable segments are determined based on discrete financial information provided to our Chief Executive Officer
who is our chief operating decision maker (“CODM”). In deciding how to allocate resources and assess performance, the
CODM reviews adjusted gross margin by operating segment, consolidated financials and revenue by major geography, and
product and service lines. Specifically, the CODM reviews adjusted gross margin by segment to evaluate segment
profitability, identify cost trends and make operational decisions to support our segments. Consolidated financials provide a
holistic view of our overall financial health to guide capital allocation and entity wide decisions. Disaggregated views of
revenue by major geography and product line support the evaluation of specific market and product performance to
understand customer trends. There are no operating segments that are aggregated. Furthermore, there are no inter-segment
sales. Assets and other expense items, such as research and development and selling, general, and administrative expenses,
are not provided to the CODM by segment, as our CODM does not evaluate our operating segments using this discrete
information. As such, these items are not relevant to adjusted gross margin leveraged by the CODM to assess segment
performance. As a result, they are not disclosed by segment. We perform an analysis of our reportable segments at least
annually. The vast majority of our long-lived assets, including property, plant and equipment and right-of-use lease assets
are located within the United States. International long-lived assets are immaterial. Additionally, the majority of our
revenues are generated within the United States.
During the year ended December 31, 2024, the segment measure of profit and loss used by the CODM was changed
from gross margin to adjusted gross margin, defined as gross margin before stock-based compensation expense,
amortization of acquired intangible assets and inventory step-up amortization related to acquisitions. Each of the
aforementioned components of our segment measure of profit and loss, adjusted gross margin, are included within other
63
segment items. This change in segment measure allows the CODM to better assess operating results over time and is
consistent with how the CODM evaluates our businesses. Accordingly, we have updated our segment disclosure for the
years ended December 31, 2023 and 2022 to conform to the new presentation. For additional details, refer to Note 20.
Geographic Information
The majority of our sales to international customers are transacted in foreign currencies and are attributed to each
country based on the shipping address of the distributor or customer. For the years ended December 31, 2024, 2023 and
2022, no individual country outside the United States represented more than 10% of net sales. Substantially all of our assets
are located in the United States. For additional details, refer to Note 2.
Cash, Cash Equivalents and Investments
We have cash, cash equivalents and investments, which at December 31, 2024 comprised cash, money market funds,
commercial paper, corporate bonds, term deposits, U.S. government bonds, U.S. Treasury bills, and agency bonds. Cash
equivalents and investments at December 31, 2023 also included U.S. Treasury inflation-protected securities. We place our
cash and cash equivalents with high quality financial institutions. Although we deposit our cash with multiple financial
institutions, our deposits regularly exceed federally insured limits. Cash and cash equivalents include funds on-hand and
highly liquid investments purchased with initial maturity of three months or less. Short-term investments include securities
with an expected maturity date within one year of the balance sheet date that do not meet the definition of a cash
equivalent, and long-term investments are securities with an expected maturity date greater than one year and less than
three years in accordance with our investment policy.
We report available-for-sale investments at fair value as of each balance sheet date and record any unrealized gains or
losses within accumulated other comprehensive loss as a component of stockholders’ equity. The cost of securities sold is
determined on a specific identification basis, and realized gains and losses are included in other income (loss), net within
the consolidated statements of operations. Income tax effects are released from accumulated other comprehensive loss for
unrealized gains or losses when the gains or losses are realized and are taxed at the statutory rate based on jurisdiction of
the underlying transaction. When the fair value is below the amortized cost of an available-for-sale investment, an estimate
of expected credit losses is made. Credit losses are recognized through the use of an allowance for credit losses account in
the consolidated balance sheets and subsequent improvements in expected credit losses are recognized as a reversal of an
amount in the allowance account. If we have the intent to sell the security or it is more likely than not that we will be
required to sell the security prior to recovery of its amortized cost basis, then the allowance for the credit loss is written-off
and the excess of the amortized cost basis of the asset over its fair value is recorded in the consolidated statements of
operations. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the
investments before recovery of their amortized cost bases. There were no credit losses recorded on our investment portfolio
during the years ended December 31, 2024, 2023, and 2022.
Restricted Cash
Restricted cash balances were $11.9 million and $2.1 million as of December 31, 2024 and 2023, respectively. This
increase is primarily attributable to a payment held in escrow related to the potential construction of our headquarters
building in Scottsdale, Arizona. Restricted cash also includes funds held in international bank accounts for various
operating and financing activities. As of December 31, 2024, approximately $11.8 million was included in prepaid
expenses and other current assets on our consolidated balance sheet, with the remainder in other long-term assets.
Inventory
Inventories are stated at the lower of cost or net realizable value, using a standard cost method which approximates
the first-in, first-out method. Additional provisions are made to reduce excess, obsolete or slow-moving inventories to their
net realizable value. These provisions are based on our best estimate after considering historical demand, projected future
demand, inventory purchase commitments, industry and market trends and conditions among other factors. We evaluate
64
inventory costs for abnormal costs due to excess production capacity and treat such costs as period costs. Raw materials
include an immaterial amount of work-in-process inventory.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation and amortization. Additions and
improvements are capitalized, while ordinary maintenance and repair expenditures are charged to expense as incurred.
Depreciation is calculated using the straight-line method over the estimated economic life.
Software Development Costs
We expense software development costs, including costs to develop software products or the software component of
products and services to be marketed to external users, before technological feasibility of such products is reached.
Software development costs also include costs to develop software programs to be used solely to meet our internal
needs and applications. We capitalize development costs related to these software applications once the preliminary project
stage is complete and it is probable that the project will be completed and the software will be used to perform the intended
function. Additionally, we capitalize qualifying costs incurred for upgrades and enhancements to existing software that
result in additional functionality. Costs related to preliminary project planning activities, post-implementation activities,
maintenance and minor modifications are expensed as incurred. Internal-use software development costs are amortized on a
straight-line basis over the estimated useful life of the software.
We evaluate the useful lives of these assets on an annual basis and test for impairment whenever events or changes in
circumstances occur that could impact the recoverability of these assets.
Leases
We determine if a contract contains a lease at inception. At commencement, lease contracts are evaluated for
classification as an operating or finance lease. Operating lease right-of-use (“ROU”) assets and liabilities are recognized
based on the present value of future minimum lease payments over the lease term at the commencement date. As most of
our leases do not provide an implicit rate, we use our estimated incremental borrowing rate based on the information
available at the commencement date in determining the present value of future payments. Additionally, we use the portfolio
approach in determining the discount rate used to present value lease payments. We give consideration to our 2027 Notes,
line of credit, macroeconomic factors, as well as publicly available data for instruments with similar characteristics when
estimating our incremental borrowing rates. The operating lease ROU asset also includes any lease payments made and
initial direct costs incurred and excludes lease incentives.
We have operating leases for office space, manufacturing and logistical functions. Leases with an initial term of 12
months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis
over the lease term. We do not have any material variable lease costs associated with our operating leases. For leases
beginning on or after January 1, 2019, we account for lease components separately from non-lease components for all asset
classes.
Our operating leases have remaining terms of less than one to approximately 12 years, some of which include one or
more options to renew for up to five years, and some of which include options to terminate the leases within one year. The
exercise of lease renewal options is at our sole discretion and such options are included in ROU assets and liabilities for
renewal periods that are reasonably certain of exercise. Certain of these lease agreements include stated rental payment
escalations. Our lease agreements do not contain any material residual value guarantees or material restrictive covenants.
We may enter into sales-type finance leases as an alternative means to realize value for our body cameras and related
accessories. For sales-type finance leases where we are the lessor, we recognize our selling profit on a gross basis at lease
commencement within net sales from products and cost of product sales, respectively. Interest income is recognized over
the lease term within interest income, net. The current and long-term portions of our investment in sales-type leases are
included in prepaid expenses and other current assets and other long-term assets, respectively. Given the immateriality of
65
our finance lease activity as of December 31, 2024, no further disclosure considerations related to finance leases are
necessary.
Valuation of Goodwill, Intangible and Long-lived Assets
We evaluate whether events and circumstances have occurred that indicate the remaining estimated useful life of
long-lived assets and identifiable intangible assets, excluding goodwill and intangible assets with indefinite useful lives,
may warrant revision or that the remaining balance of these assets may not be recoverable. Such events and circumstances
could include a change in the product mix, a change in the way products are created, produced or delivered, or a significant
change in the way products are branded and marketed. In performing the review for recoverability, we estimate the future
undiscounted cash flows expected to result from the use of the assets and their eventual disposition. The amount of
impairment loss, if impairment exists, is calculated based on the excess of the carrying amounts of the assets over their
estimated fair values computed using discounted cash flows.
Finite-lived intangible assets and other long-lived assets are amortized using the straight-line method over the
estimated useful life. We do not amortize goodwill and intangible assets with indefinite useful lives; rather such assets are
tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may
be impaired. We test goodwill and intangible assets for impairment on an annual basis on December 31, 2024 and on an
interim basis when certain events and circumstances exist.
During the years ended December 31, 2024 and December 31, 2023, long-lived asset impairment charges were
immaterial. During the year ended December 31, 2022, we recorded $5.3 million of impairment charges, the majority of
which were related to the cease-use of a portion of our Seattle office.
No impairment charges were recognized related to goodwill or intangible assets during the years ended December 31,
2024, 2023, and 2022.
Customer Deposits
We require deposits in advance of shipment for certain customer sales orders. Additionally, customers may elect to
make deposits with us related to contracts for our products and services that were not executed as of the end of a reporting
period. Customer deposits are included in other current liabilities in the consolidated balance sheets.
Revenue Recognition, Receivables, Contract Assets, and Deferred Revenue
We derive revenue from two primary sources: (1) the sale of physical products, including CEDs, Axon cameras,
Axon Signal-enabled devices, corresponding hardware extended warranties, and related accessories such as Axon docks,
cartridges and batteries, among others, and (2) subscriptions to our Axon Evidence digital evidence management SaaS
offering (including data storage fees and other ancillary services), which includes varying levels of support. To a lesser
extent, we also recognize revenue from training, professional services and other software and SaaS services. We apply the
five-step model outlined in ASC 606. For additional discussion, refer to Note 2.
We enter into contracts that can include various combinations of products and services, each of which is generally
distinct and accounted for as a separate performance obligation. A performance obligation is a promise in a contract to
transfer a distinct good or service to the customer, and is the unit of account in ASC 606. For contracts with multiple
performance obligations, we allocate the contract transaction price to each performance obligation using our estimate of the
standalone selling price (“SSP”) of each distinct good or service in the contract. Revenues are recognized upon transfer of
control of promised products or services to customers in an amount that reflects the consideration we expect to receive in
exchange for those products or services. Performance obligations to deliver products, including CEDs, Axon cameras and
related accessories, such as docks, cartridges and batteries, are generally satisfied at the point in time we ship the product,
as this is when the customer obtains control of the asset under our standard terms and conditions. In certain contracts with
non-standard terms and conditions, these performance obligations may not be satisfied until delivery or formal customer
acceptance occurs. Performance obligations to fulfill service-type extended warranties and provide our SaaS offerings,
including Axon Evidence and other cloud services, are generally satisfied over time as the customer receives and consumes
the benefits of these services over the stated service period.
We determine the term of our arrangements based on identifying the contract with the customer. In certain of our
arrangements, the customer may have termination rights. In these instances, we determine if there is a substantive penalty.
For contracts with a substantive penalty, the accounting term will be the legal contract term, inclusive of the periods for
66
which the customer termination rights exist. In these contracts with no substantive penalty, we also consider if the option
for our customer to purchase additional goods or services represents an additional performance obligation in the form of a
material right.
While our products and services may be sold on a standalone basis, we generally combine our hardware products and
services together and sell them to our customers in single transactions where the customer can make payments over a
multi-year period. These sales may include payments for upfront hardware and services, as well as payments for hardware
and services to be provided at a future date. Additionally, we offer customers the ability to purchase CED cartridges and
certain services on an unlimited basis over the contractual term. Due to the nature of these arrangements whereby we are
obligated to deliver products at the customer’s request, we account for these arrangements as stand-ready obligations, and
recognize revenue ratably over the contract period. Cost of product sales is recognized when control of hardware products
or accessories has transferred to the customer.
We recognize shipping costs as an expense in cost of product sales when the control of hardware products or
accessories has transferred to the customer. Sales tax collected on sales is netted against government remittances and, thus,
recorded on a net basis. Payment terms and conditions vary by contract type and geography, but our standard terms are that
payments are due within 30 days from the date of invoice.
The timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an
unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset
when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized
subsequent to invoicing. Contract asset amounts that will be invoiced during the subsequent 12-month period from the
balance sheet date are classified as current assets and the remaining portion is recorded within other long-term assets on our
consolidated balance sheets. Deferred revenue that is expected to be recognized during the subsequent 12-month period
from the balance sheet date is recorded as current deferred revenue and the remaining portion is recorded as long-term
deferred revenue. Generally, customers are billed in annual installments.
Contract assets generally result from our subscription programs where we satisfy a hardware performance obligation
upon shipment to the customer, and the right to the portion of the transaction price allocated to that hardware performance
obligation is conditional on our future performance of a SaaS service obligation under the contract. We recognize a portion
of the amount allocated to hardware products shipped to the customer as accounts receivable when invoiced to the
customer, and record the remaining allocated value as a contract asset as we have generally fulfilled our hardware
performance obligation upon shipment. Unbilled accounts receivable expected to be invoiced and collected within 12
months were $5.6 million as of December 31, 2024, and were included in accounts and notes receivable, net on our
consolidated balance sheet.
Contract liabilities generally consist of deferred revenue on our subscription programs where we generally invoice
customers at the beginning of each annual contract period and record a receivable at the time of invoicing when there is an
unconditional right to consideration. Deferred revenue is composed mainly of unearned revenue related to our Axon
Evidence SaaS platform, secure cloud-based storage, service-type extended warranties, stand-ready obligations in our
cartridge programs, and rights to future CED, Axon camera and related accessories hardware in our subscription programs.
For additional discussion, refer to Note 2.
Reserve for Expected Credit Losses
Sales are typically made on credit, and we generally do not require collateral. We are exposed to credit losses
primarily through sales of products and services. Our expected loss allowance methodology for accounts receivable,
contract assets, notes receivable and off-balance-sheet exposures is developed using historical collection experience,
published or estimated credit default rates for entities that represent our customer base, current and future economic and
market conditions and a review of the current status of customers’ trade accounts receivables. We review receivables for
U.S. and international customers separately to better reflect different published credit default rates and economic and
market conditions. Additionally, specific reserve amounts are established to record the appropriate provision for customers
that have a higher probability of default. Our monitoring activities include account reconciliation, dispute resolution,
payment confirmation, consideration of customers’ financial condition and macroeconomic conditions. Balances are
written off when determined to be uncollectible. Accounts and notes receivable, contract assets and off-balance-sheet
exposures are presented net of a reserve for expected credit losses, which totaled $5.6 million and $4.0 million as of
December 31, 2024 and 2023, respectively. This reserve represents our best estimate and application of judgment
67
considering a number of factors, including those listed above. In the event that actual uncollectible amounts differ from our
estimates, additional expense could be necessary. For additional discussion, refer to Note 4.
Deferred Commissions
We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of
sales commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and
amortized consistent with the expected recognition timing of the revenue for the underlying performance obligations.
For contract costs related to performance obligations with an amortization period of one year or less, we apply the
practical expedient to expense these sales commissions when incurred. These costs are recognized as incurred within
SG&A expenses in the consolidated statements of operations and comprehensive income. For additional discussion, refer
to Note 2.
Cost of Product and Service Sales
Cost of product sales represents manufacturing costs consisting of materials, labor and overhead related to finished
goods and components. Shipping costs incurred related to product delivery are also included in cost of products sold. Cost
of service sales includes third-party cloud services, software maintenance and support costs – including personnel costs,
associated with supporting Evidence.com and other software related services.
Advertising Costs
We expense advertising costs in the period in which they are incurred. We incurred advertising costs of $4.4 million,
$1.9 million and $2.3 million in the years ended December 31, 2024, 2023 and 2022, respectively. Advertising costs are
included within SG&A expenses in the consolidated statements of operations.
Warranty Reserves
We warranty our CEDs, Axon cameras and certain related accessories from manufacturing defects on a limited basis
for a period of one year after purchase and, thereafter, will replace any defective unit for a fee. We estimate and record a
liability for standard warranty at the time products are sold. The estimates are based on historical experience and reflect our
best estimates of costs to be incurred over the warranty period. Adjustments may be required when actual or projected costs
differ. Variations in component failure rates, repair costs and the point of failure within the product life cycle are key
drivers that impact our periodic re-assessment of the warranty liability.
Revenue related to separately priced extended warranties is initially recorded as deferred revenue at its allocated
amount and subsequently recognized as net sales on a straight-line basis over the warranty service period. Costs related to
extended warranties are charged to cost of product sales when the costs become probable and can be reasonably estimated.
Changes in our estimated warranty reserve were as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Balance, beginning of period
$
7,374 $
811 $
2,822
Utilization of reserve
(5,992)
(1,499)
(2,209)
Adjustment to reserve due to business combinations
1,311
—
—
Warranty expense
5,591
8,062
198
Balance, end of period
$
8,284 $
7,374 $
811
Research and Development Expenses
We expense as incurred R&D costs that do not meet the qualifications to be capitalized. R&D costs include payroll
costs and stock-based compensation for the personnel involved in R&D functions, as well as indirect manufacturing costs
and supplies, consulting services and internal infrastructure costs incurred in connection with product research and
development. We incurred R&D expense of $441.6 million, $303.7 million and $233.8 million in 2024, 2023 and 2022,
respectively.
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Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement amounts of assets and liabilities
and their respective tax bases, and for operating loss and tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in future years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rate is recognized
in income in the period that includes the enactment date. Deferred tax assets are reduced through the establishment of a
valuation allowance if, based upon available evidence, it is determined that it is more likely than not that the deferred tax
assets will not be realized. We use factors to assess the likelihood of realization of deferred tax assets such as the forecast
of future taxable income and available tax planning that could be implemented to realize the deferred tax assets.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will
be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits
recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has
a greater than 50% likelihood of being realized upon ultimate resolution. We also assess whether uncertain tax positions, as
filed, could result in the recognition of a liability for possible interest and penalties. Our policy is to include interest and
penalties related to unrecognized tax benefits as a component of income tax expense. For additional details, refer to Note
14.
Fair Value Measurements and Financial Instruments
We use the fair value framework that prioritizes the inputs to valuation techniques for measuring financial assets and
liabilities measured on a recurring basis and for non-financial assets and liabilities when these items are re-measured. Fair
value is considered to be the exchange price in an orderly transaction between market participants, to sell an asset or
transfer a liability at the measurement date. The hierarchy below lists three levels of fair value based on the extent to which
inputs used in measuring fair value are observable in the market. We categorize each of our fair value measurements in one
of these three levels based on the lowest level input that is significant to the fair value measurement in its entirety. These
levels are:
•
Level 1 – Valuation techniques in which all significant inputs are unadjusted quoted prices from active markets
for assets or liabilities that are identical to the assets or liabilities being measured.
•
Level 2 – Valuation techniques in which significant inputs include quoted prices from active markets for assets
or liabilities that are similar to the assets or liabilities being measured and/or quoted prices from markets that are
not active for assets or liabilities that are identical or similar to the assets or liabilities being measured. Also,
model-derived valuations in which all significant inputs and significant value drivers are observable in active
markets are Level 2 valuation techniques.
•
Level 3 – Valuation techniques in which one or more significant inputs or significant value drivers are
unobservable. Unobservable inputs are valuation technique inputs that reflect our own assumptions about inputs
that market participants would use in pricing an asset or liability.
We have cash equivalents and investments, which at December 31, 2024 comprised money market funds, commercial
paper, corporate bonds, term deposits, U.S. government bonds, U.S. Treasury bills, and agency bonds. For additional
details regarding our cash equivalents and investments, refer to Note 3. Debt investments are classified as available-for-sale
and realized gains and losses are recorded using the specific identification method. We have corporate-owned life
insurance policies, included in the balance of other long-term assets, which are used to fund our deferred compensation
plan. The balances of these policies as of December 31, 2024 and 2023 were $8.4 million and $7.6 million, respectively.
We determine the fair values of our insurance contracts by obtaining the cash surrender value of the contracts from the
issuer, a Level 2 valuation technique.
We have an investment in marketable securities, for which changes in fair value are recorded in the consolidated
statements of operations as unrealized gain (or loss) on marketable securities, which is included in other income (loss), net.
We have strategic equity investments in various privately held companies as of December 31, 2024 and 2023. The
estimated fair value of the investments was determined based on Level 3 inputs. In determining the estimated fair value of
our strategic investments in privately held companies, we utilize observable data available to us as discussed further in
Note 8.
69
The fair value of our 0.50% convertible senior notes due 2027 (the "Notes" or "2027 Notes") is determined based on
the closing trading price per $1,000 of the Notes as of the last day of trading for the period. We consider the fair value of
the 2027 Notes at December 31, 2024 and 2023, to be a Level 2 measurement based on the fair value hierarchy. The fair
value is primarily affected by the trading price of our common stock and market interest rates.
Our financial instruments also include accounts and notes receivable, accounts payable and accrued liabilities. Due to
the short-term nature of these instruments, their fair values approximate their carrying values on the consolidated balance
sheets.
Stock-Based Compensation
We have historically utilized stock-based compensation for key employees and non-employee directors as a means of
attracting and retaining talented personnel. We recognize compensation expense for our stock-based compensation
program, which includes grants of RSUs, PSUs and stock options. Our stock-based compensation awards are classified as
equity and measured at the fair market value of the underlying common stock at the grant date. When determining the grant
date fair value of stock-based awards, we consider whether an adjustment is required to the observable market price or
volatility of our common stock used in the valuation as a result of material non-public information.
RSUs
Stock-based compensation expense for RSUs is measured based on the closing fair market value of our common
stock on the date of grant. We recognize stock-based compensation expense over the award’s requisite service period using
the straight-line attribution method for service-based RSUs. Service-based grants generally have a vesting period of one to
four years and a contractual maturity of ten years. We account for forfeitures as they occur as a reduction to stock-based
compensation expense and additional paid-in-capital.
PSUs
Stock-based compensation expense for PSUs is measured based on the closing fair market value of our common
stock on the date of grant. We recognize stock-based compensation expense over the award's requisite service period,
which is defined as the longest explicit, implicit or derived service period based on our estimate of the probability of the
performance criteria being satisfied, adjusted at each balance sheet date. The vesting of our PSUs is generally contingent
upon the achievement of certain performance criteria related to our operating performance, as well as successful and timely
development and market acceptance of future product introductions. For PSUs containing only performance conditions,
compensation cost is recognized using the graded attribution model over the explicit or implicit service period. In addition,
certain of the PSUs have further service requirements subsequent to achievement of the performance criteria.
Performance-based grants generally have vesting periods ranging from one to eight years and a contractual maturity
of ten years. We account for forfeitures as they occur as a reduction to stock-based compensation expense and additional
paid-in-capital. Our performance-based restricted stock units include XSUs granted under the 2024 Employee XSP and the
2024 CEO Performance Award discussed further below.
2024 Employee XSP and 2024 CEO Performance Award
On May 10, 2024, our shareholders approved the 2024 Employee XSP. The 2024 Employee XSP includes an
approved pool of shares of common stock reserved for grants of awards of XSUs to employees. The grants of XSUs (the
“2024 XSUs”) are grants of performance-based RSUs. The program includes seven substantially equal tranches that will
vest upon certification by the Compensation Committee of the Board of Directors (the “Compensation Committee”) upon
achievement of three independent vesting conditions: (1) stock price goals; (2) operational goals; and (3) minimum service
conditions.
Additionally, on May 10, 2024, shareholders approved a grant of XSUs to our CEO, Patrick W. Smith (the “2024
CEO Performance Award”). The stock price goals and operational goals applicable to the 2024 CEO Performance Award
are identical to those under the 2024 Employee XSP, but Mr. Smith is subject to a longer minimum required service period.
Stock-based compensation expense associated with the XSUs is recognized over the requisite service period, which is
considered the longest explicit, implicit or derived service period for each respective tranche. We utilized Monte Carlo
simulations to evaluate a range of possible future stock price goals over the term of the awards at each of the respective
70
grant dates. The median of all iterations of the simulation was used as the basis for the derived service period for each
tranche.
We measured the grant date fair value of each tranche using a Monte Carlo simulation with the following
assumptions: risk-free interest rate of 3.6% – 4.5%, expected volatility of 41.0% – 46.8%, expected term of 8.0 – 8.6 years,
and dividend yield of 0.0%. We utilized a blended volatility assumption, equally weighting both historical volatility and
implied volatility, resulting in a weighted-average expected volatility of 41.6%. An illiquidity discount is considered in our
estimate of the fair value of shares during post-vesting holding periods. The mandatory post-vesting holding periods for
XSUs will lapse on the earlier of (i) December 31, 2030, or (ii) the date that a subsequent tranche vests and settles.
Therefore, the illiquidity discount is dependent upon projected tranche vesting dates, determined via the Monte Carlo
simulation. This simulation is based on a subjective assessment of our forward-looking financial projections, taking into
consideration statistical analysis.
Even though no tranche with respect to either XSUs granted under the 2024 Employee XSP or the 2024 CEO
Performance Award vests unless the applicable stock price goal, operational goal and corresponding minimum service
condition are achieved, stock-based compensation expense is recognized when an operational goal is considered probable
of attainment regardless of the achievement of the stock price and minimum service conditions. As of December 31, 2024,
we consider some of the tranches probable and will recognize the expense ratably over their respective expected vesting
periods. This may result in volatility and higher upfront expense recognition and is subject to change based on periodic
probability assessments. Refer to Note 16 for further discussion.
Stock Options
On May 24, 2018, our shareholders approved the Board of Directors’ grant of 6.4 million performance-based stock
options to our CEO, Patrick W. Smith, (the “2018 CEO Performance Award”). The 2018 CEO Performance Award
consisted of 12 substantially equal tranches with a vesting schedule based entirely on the attainment of both operational
goals (performance conditions) and market capitalization goals (market conditions), assuming continued employment
either as the Chief Executive Officer or as both Executive Chairman and Chief Product Officer and service through each
vesting date. For performance-based stock options with a vesting schedule based entirely on the attainment of both
performance and market conditions, stock-based compensation expense was recognized for each pair of performance and
market conditions over the longer of the expected achievement period of the performance and market conditions, beginning
at the point in time that the relevant performance condition is considered probable of achievement. The fair value of such
awards was estimated on the grant date using Monte Carlo simulations.
Income per Common Share
Basic income per common share is computed by dividing net income by the weighted average number of common
shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding
stock-based awards, our 2027 Notes, and warrants to acquire shares of our common stock (the "Warrants" or "2027
Warrants"). The effects of outstanding stock-based awards, our 2027 Notes, and our 2027 Warrants are excluded from the
71
computation of diluted net income per share in periods in which the effect would be antidilutive. The calculation of the
weighted average number of shares outstanding and earnings per share is as follows (in thousands except per share data):
For the Year Ended December 31,
2024
2023
2022
Numerator for basic and diluted earnings per share:
Net income
$
377,034 $
175,783 $
146,930
Denominator:
Weighted average shares outstanding
75,748
74,195
71,093
Dilutive effect of stock-based awards
1,435
1,261
1,441
Dilutive effect of 2027 Notes
1,139
—
—
Dilutive effect of 2027 Warrants
236
—
—
Diluted weighted average shares outstanding
78,558
75,456
72,534
Net income per common share:
Basic
$
4.98 $
2.37 $
2.07
Diluted
$
4.80 $
2.33 $
2.03
Potentially dilutive securities that are not included in the calculation of diluted net income per share because doing so
would be antidilutive are as follows (in thousands):
For the Year Ended December 31,
2024
2023
2022
Stock-based awards
4,132
1,014
3,264
2027 Notes
1,877
3,017
3,017
2027 Warrants
2,781
3,017
3,017
Total potentially dilutive securities
8,790
7,048
9,298
For additional information regarding our 2027 Notes, refer to Note 12.
Recently Issued Accounting Guidance
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic
280): Improvements to Reportable Segment Disclosures. ASU 2023-07 requires improvements to annual and interim
segment disclosures, primarily through enhanced disclosures around significant segment expenses. We adopted this ASU
effective for our Annual Report on Form 10-K for the year ending December 31, 2024, and as a result, enhanced certain
qualitative considerations within "Segment Information" of Note 1. There were no significant impacts to our existing
quantitative disclosures as a result of our adoption of this ASU.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax
Disclosures. ASU 2023-09 is intended to enhance the transparency and decision usefulness of income tax. The provisions
of ASU 2023-09 are effective for our Annual Report on Form 10-K for the year ending December 31, 2025, with early
adoption permitted. We are currently evaluating the impact of this update on our consolidated financial statements.
In March 2024, the SEC adopted final rules under SEC Release No. 34-99678 and No. 33-11275, The Enhancement
and Standardization of Climate-Related Disclosures for Investors (the “Final Rules”), which will require registrants to
provide certain climate-related information in their registration statements and annual reports. The Final Rules require,
among other things, disclosure in the notes to the audited financial statements of the effects of severe weather events and
other natural conditions, subject to certain thresholds, as well as amounts related to carbon offsets and renewable energy
credits or certificates in certain circumstances. The financial statement disclosure requirements of the Final Rules will
begin phasing in for fiscal year 2025. In April 2024, the SEC stayed the effectiveness of the Final Rules pending judicial
review. We are currently evaluating the impact of the Final Rules on our consolidated financial statements.
72
In November 2024, the FASB issued ASU 2024-03, Income Statement (Topic 220): Reporting Comprehensive
Income - Expense Disaggregation Disclosures. ASU 2024-03 is intended to enhance level of detail disclosed related to
expense categories and provide additional disclosure of expenses by nature. The provisions of ASU 2024-03 are effective
for our Annual Report on Form 10-K for the year ending December 31, 2027, with early adoption permitted. We are
currently evaluating the impact of this update on our consolidated financial statements.
In November 2024, the FASB issued ASU 2024-04, Debt (Topic 470): Debt with Conversion and Other Options.
ASU 2024-04 clarifies the assessment of whether a transaction should be accounted for as an induced conversion or debt
extinguishment when the terms of convertible debt are changed to induce conversion. The provisions of ASU 2024-04 are
effective for our Annual Report on Form 10-K for the year ending December 31, 2026, with early adoption permitted. We
are currently evaluating the impact of this update.
Note 2 - Revenues
Nature of Products and Services
The following table presents our revenues by primary product and service offering and reportable segment (in
thousands):
Year Ended December 31, 2024
Year Ended December 31, 2023
TASER
Software and
Sensors
Total
TASER
Software and
Sensors
Total
TASER Devices (Professional)
$
453,055 $
— $
453,055 $
333,923 $
— $
333,923
Cartridges
246,766
—
246,766
193,285
—
193,285
Axon Evidence and Cloud Services
54,913
808,256
863,169
35,680
566,003
601,683
Extended Warranties
37,515
66,141
103,656
31,689
55,154
86,843
Axon Body Cameras and
Accessories
—
246,855
246,855
—
183,023
183,023
Axon Fleet Systems
—
104,890
104,890
—
121,842
121,842
Other (1) (2)
26,424
37,711
64,135
18,933
21,167
40,100
Total
$
818,673 $ 1,263,853 $ 2,082,526 $
613,510 $
947,189 $ 1,560,699
Year Ended December 31, 2022
TASER
Software and
Sensors
Total
TASER Devices (Professional)
$
282,698 $
— $
282,698
Cartridges
181,686
—
181,686
Axon Evidence and Cloud Services
18,182
367,852
386,034
Extended Warranties
29,056
45,507
74,563
Axon Body Cameras and Accessories
—
157,281
157,281
Axon Fleet Systems
—
63,017
63,017
Other (1) (2)
19,422
22,442
41,864
Total
$
531,044 $
656,099 $
1,187,143
(1) TASER segment “Other” includes smaller categories, such as VR hardware, weapons training revenue such as
revenue associated with our Master Instructor School, and TASER consumer device sales.
(2) Software and Sensors segment “Other” includes revenue from items including Signal Sidearm, Interview Room,
Axon Air, partners' contra-revenue and other sensors and equipment.
73
The following table presents our revenues disaggregated by geography (in thousands):
Year Ended December 31,
2024
2023
2022
United States
$
1,775,194
85 % $
1,335,516
86 % $
985,183
83 %
Other countries
307,332
15
225,183
14
201,960
17
Total
$
2,082,526
100 % $
1,560,699
100 % $
1,187,143
100 %
Contract Balances
The following table presents our contract assets, contract liabilities and certain information related to these balances
as of and for the year ended December 31, 2024 (in thousands):
Year Ended December 31,
2024
2023
2022
Contract assets, net
$
487,805 $
371,614 $
249,001
Contract liabilities (deferred revenue)
973,640
741,316
593,038
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the
period
499,727
357,979
258,063
During the year ended December 31, 2024, our contract assets balance increased by $116.2 million, or 31.3%, due to
increased sales under subscription plans. Contract liabilities increased $232.3 million, or 31.3%, for the year ended
December 31, 2024 due to acquisitions and increased subscription invoicing for Software and Sensors hardware and
services in advance of fulfilling performance obligations to customers.
Contract liabilities (deferred revenue) consisted of the following (in thousands):
December 31, 2024
December 31, 2023
Current
Long-Term
Total
Current
Long-Term
Total
Warranty:
TASER
$
16,107 $
19,288 $
35,395 $
14,666 $
18,828 $
33,494
Software and Sensors
36,842
19,706
56,548
22,642
8,165
30,807
52,949
38,994
91,943
37,308
26,993
64,301
Hardware:
TASER
49,195
35,116
84,311
35,845
29,689
65,534
Software and Sensors
89,992
144,191
234,183
63,299
117,024
180,323
139,187
179,307
318,494
99,144
146,713
245,857
Services:
TASER
9,635
6,134
15,769
7,832
3,983
11,815
Software and Sensors
411,184
136,250
547,434
326,131
93,212
419,343
420,819
142,384
563,203
333,963
97,195
431,158
Total
$
612,955 $
360,685 $
973,640 $
470,415 $
270,901 $
741,316
December 31, 2024
December 31, 2023
Current
Long-Term
Total
Current
Long-Term
Total
TASER
$
74,937 $
60,538 $
135,475 $
58,343 $
52,500 $
110,843
Software and Sensors
538,018
300,147
838,165
412,072
218,401
630,473
Total
$
612,955 $
360,685 $
973,640 $
470,415 $
270,901 $
741,316
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Remaining Performance Obligations
As of December 31, 2024, we had approximately $7.9 billion of remaining performance obligations, which included
both recognized contract liabilities as well as amounts that will be invoiced and recognized in future periods. The
remaining performance obligations are limited only to arrangements that meet the definition of a contract under ASC 606
as of December 31, 2024. We currently expect to recognize between approximately 20% - 25% of this balance over the
next 12 months, and expect the remainder to be recognized over the following ten years, subject to risks related to delayed
deployments, budget appropriation, or other contract cancellation clauses.
Costs to Obtain a Contract
We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of
sales commissions. As of December 31, 2024, our assets for costs to obtain contracts were as follows (in thousands):
December 31,
2024
December 31,
2023
Current deferred commissions (1)
$
59,025 $
46,224
Deferred commissions, net of current portion (2)
154,894
119,084
$
213,919 $
165,308
(1)
Current deferred commissions are included within prepaid expenses and other current assets on the consolidated
balance sheets.
(2)
Deferred commissions, net of current portion, are included in other long-term assets on the consolidated balance
sheets.
During the years ended December 31, 2024, 2023 and 2022, we recognized $50.8 million, $34.1 million, and $24.4
million, respectively, of amortization related to deferred commissions. These costs are recorded within SG&A expenses in
the consolidated statements of operations and comprehensive income (loss).
Significant Judgments
Our contracts with certain municipal government customers may be subject to budget appropriation, other contract
cancellation clauses or optional renewal periods. In contracts where the customer’s performance is subject to budget
appropriation clauses, we generally consider the likelihood of non-appropriation to be remote when determining the
contract term and transaction price. Contracts with other cancellation provisions or optional periods may require judgment
in determining the contract term, including the existence of substantive termination penalties, determining transaction price
and identifying the performance obligations.
At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required
to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a
separate contract or as a modification. Generally, contract modifications containing additional goods and services that are
determined to be distinct and sold at their SSP are accounted for as a separate contract. For contract modifications where
both criteria are not met, the original contract is updated and the required adjustments to revenue and contract assets,
liabilities and other accounts are made accordingly.
Our contracts with customers often include promises to transfer multiple products and services to a customer.
Determining whether products and services are considered distinct performance obligations that should be accounted for
separately rather than together may require significant judgment. We consider CED devices and related accessories, as well
as Axon cameras and related accessories, to be separately identifiable from each other as well as from extended warranties
on these products and the SaaS subscriptions to Axon Evidence and other cloud services.
In contracts where there are timing differences between when we transfer a promised good or service to the customer
and when the customer pays for that good or service, we assess whether there is any implied financing within the
transaction, and if so, recognize related interest income, or expense, on the transaction. The amount of imputed interest is
immaterial for the years ended December 31, 2024, 2023 and 2022.
Judgment is required to determine the SSP for each distinct performance obligation. We analyze stand-alone sales of
our products and services as a basis for estimating the SSP of our products and services and then use that SSP as the basis
75
for allocating the transaction price when our products and services are sold together in a contract with multiple
performance obligations. In instances where the SSP is not directly observable, such as when we do not sell the product or
service separately, we determine the SSP using information that may include cost plus margin, market comparisons and
other observable inputs.
Note 3 - Cash, Cash Equivalents and Investments
The following table summarizes our cash, cash equivalents, marketable securities and available-for-sale investments
at December 31, 2024 (in thousands):
As of December 31, 2024
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Cash and
Cash
Equivalents
Marketable
Securities
Short-Term
Investments
Cash
$
94,919 $
— $
— $
94,919
$
94,919 $
— $
—
Level 1:
Money market funds
322,874
—
—
322,874
322,874
—
—
Agency bonds
996
—
—
996
—
—
996
U.S. Government bonds
75,994
7
(5)
75,996
—
—
75,996
U.S. Treasury bills
14,431
25
—
14,456
—
—
14,456
Marketable securities
90,000 108,270
—
198,270
—
198,270
—
Subtotal
504,295 108,302
(5)
612,592
322,874
198,270
91,448
Level 2:
Term deposits
136,480
—
—
136,480
11,480
—
125,000
Corporate bonds
122,018
10
(63)
121,965
24,075
—
97,890
Commercial paper
20,393
—
—
20,393
1,496
—
18,897
Subtotal
278,891
10
(63)
278,838
37,051
—
241,787
Total
$
878,105 $ 108,312 $
(68) $ 986,349
$ 454,844 $ 198,270 $ 333,235
As of December 31, 2024, we had $136.7 million of available-for-sale investments with unrealized losses of which
none have been in a continuous unrealized loss position for 12 months or longer. We do not intend to sell the investments
and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost
bases.
Acquired common stock is recorded as marketable securities in the consolidated balance sheets and its fair value is
adjusted every reporting period. Changes in fair value are recorded in the consolidated statement of operations as
unrealized gain (or loss) on marketable securities, which is included in other income (loss), net. During the year ended
December 31, 2024, we recorded an unrealized gain on marketable securities of $120.3 million.
76
The following table summarizes our cash, cash equivalents and available-for-sale investments at December 31, 2023
(in thousands):
As of December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Cash and
Cash
Equivalents
Marketable
Securities
Short-Term
Investments
Cash
$ 406,743 $
— $
— $ 406,743
$ 406,743 $
— $
—
Level 1:
Money market funds
1,470
—
—
1,470
1,470
—
—
Agency bonds
222,057
2
(174) 221,885
101,635
—
120,250
U.S. Government bonds
238,747
120
(237) 238,630
—
—
238,630
U.S. Treasury bills
148,063
28
— 148,091
88,697
—
59,394
Marketable securities
90,000
—
(12,060)
77,940
—
77,940
—
Subtotal
700,337
150
(12,471) 688,016
191,802
77,940
418,274
Level 2:
Term deposits
128,205
—
— 128,205
—
—
128,205
Corporate bonds
80,646
8
(165)
80,489
—
—
80,489
Treasury inflation-protected
securities
2,635
—
(5)
2,630
—
—
2,630
Commercial paper
14,456
—
—
14,456
—
—
14,456
Subtotal
225,942
8
(170) 225,780
—
—
225,780
Total
$ 1,333,022 $
158 $ (12,641) $ 1,320,539
$ 598,545 $
77,940 $ 644,054
As of December 31, 2023, we had $420.4 million of available-for-sale investments with unrealized losses. Of this
amount, $138.8 million had been in a continuous unrealized loss position for 12 months or longer, with total gross
unrealized losses of $0.3 million. We do not intend to sell the investments and it is not more likely than not that we will be
required to sell the investments before recovery of their amortized cost bases. During the years ended December 31, 2023
and 2022, we recorded a $38.7 million unrealized gain and $32.9 million unrealized loss on marketable securities,
respectively.
77
Note 4 - Expected Credit Losses
Accounts and notes receivable, contract assets and off-balance-sheet exposures are presented net of a reserve for
expected credit losses, which totaled $5.6 million, $4.0 million and $3.6 million as of December 31, 2024, 2023, and 2022,
respectively.
The following table provides a roll-forward of the allowance for expected credit losses for finance receivables and
off-balance-sheet exposures. The expected credit losses for receivables is deducted from the amortized cost basis of
accounts receivable, contract assets and notes receivable to present the net amount expected to be collected (in thousands):
Year Ended December 31, 2024
Year Ended December 31, 2023
Year Ended December 31, 2022
United
States
Other
countries
Total
United
States
Other
countries
Total
United
States
Other
countries
Total
Balance, beginning of period
$ 3,369 $
597 $ 3,966 $ 3,064 $
566 $ 3,630 $ 3,171 $
178 $ 3,349
Provision for expected credit
losses
3,725
308 4,033
815
269 1,084
309
391
700
Amounts written off charged
against the allowance
(2,309)
(95) (2,404)
(510)
(244) (754)
(416)
— (416)
Other, including foreign currency
translation
—
14
14
—
6
6
—
(3)
(3)
Balance, end of period (1)
$ 4,785 $
824 $ 5,609 $ 3,369 $
597 $ 3,966 $ 3,064 $
566 $ 3,630
(1)
Ending balance includes allowance for credit losses recorded in other current liabilities on the consolidated balance
sheets, which is related to off-balance-sheet credit exposure.
As of December 31, 2024 and December 31, 2023, the allowance for expected credit losses for each type of customer
receivable and off-balance-sheet exposures were as follows (in thousands):
December 31,
2024
December 31,
2023
Accounts receivable and notes receivable, current
$
3,322 $
2,392
Contract assets, net
2,239
1,516
Long-term notes receivable, net of current portion
48
44
Other current liabilities
—
14
Total allowance for expected credit losses on customer receivables
$
5,609 $
3,966
Note 5 - Inventory
Inventory consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
December 31,
2024
December 31,
2023
Raw materials
$
93,070 $
104,112
Finished goods
172,246
165,743
Total inventory
$
265,316 $
269,855
During the year ended December 31, 2024, we recorded provisions to reduce inventories to their lower of cost or net
realizable value of approximately $17.8 million compared to $5.4 million during the year ended December 31, 2023.
78
Note 6 - Property and Equipment
Property and equipment consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
Estimated
Useful Life
December 31,
2024
December 31,
2023
Land
N/A
$
51,612 $
51,612
Building and leasehold improvements
3 - 39 years
52,065
32,092
Production equipment
3 - 5 years
148,922
105,245
Computers, equipment and software
3 - 5 years
34,429
30,778
Furniture and office equipment
3 - 5 years
10,058
8,383
Vehicles
5 years
8,139
7,451
Capitalized internal software development costs
3 - 5 years
15,906
14,799
Construction-in-process
N/A
62,178
55,397
Total cost
383,309
305,757
Less: Accumulated depreciation
(135,985)
(105,224)
Property and equipment, net
$
247,324 $
200,533
Construction-in-process included $33.6 million and $31.0 million related to our development in Scottsdale, Arizona
at December 31, 2024 and December 31, 2023, respectively.
Depreciation and amortization expense related to property and equipment was $39.4 million, $28.1 million and $20.4
million for the years ended December 31, 2024, 2023 and 2022, respectively, of which $21.4 million, $13.6 million and
$8.5 million was included in cost of sales for the respective years.
Note 7 - Goodwill and Intangible Assets
The changes in the carrying amount of goodwill for the years ended December 31, 2024 and December 31, 2023 were
as follows (in thousands):
Year Ended December 31, 2024
Year Ended December 31, 2023
TASER
Software and
Sensors
Total
TASER
Software and
Sensors
Total
Balance, beginning of period
$
2,984 $
54,961 $
57,945 $
2,957 $
42,026 $
44,983
Goodwill acquired
—
701,695
701,695
—
12,751
12,751
Purchase accounting adjustments
—
(479)
(479)
—
(19)
(19)
Foreign currency translation
adjustments
(131)
(2,192)
(2,323)
27
203
230
Balance, end of period
$
2,853 $ 753,985 $ 756,838 $
2,984 $
54,961 $
57,945
There were no accumulated impairment losses as of December 31, 2024 and 2023.
79
Intangible assets (other than goodwill) consisted of the following at December 31, 2024 and December 31, 2023 (in
thousands):
December 31, 2024
December 31, 2023
Useful
Life
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizable (definite-lived) intangible assets:
Developed technology
3 - 8 years
$ 118,322 $
(21,337) $ 96,985 $ 29,402 $
(16,562) $ 12,840
Customer relationships
5 - 10 years
33,223
(4,716)
28,507
5,530
(3,620)
1,910
Issued trademarks
3 - 23 years
6,706
(1,784)
4,922
1,333
(817)
516
Issued patents
8 - 26 years
2,931
(1,470)
1,461
3,222
(1,707)
1,515
Domain names
5 - 10 years
3,043
(2,433)
610
3,043
(2,128)
915
Non-compete agreements
—
—
—
448
(448)
—
Total amortizable
164,225
(31,740) 132,485 42,978
(25,282)
17,696
Non-amortizable (indefinite-lived) intangible assets:
In-process research and development(1)
41,000
—
41,000
—
—
—
Trademarks
1,068
—
1,068
1,068
—
1,068
Patents and trademarks pending
604
—
604
775
—
775
Total non-amortizable
42,672
—
42,672
1,843
—
1,843
Total intangible assets
$ 206,897 $
(31,740) $ 175,157 $ 44,821 $
(25,282) $ 19,539
(1)
Consists of in-process research and development costs pertaining to the acquisition of Dedrone. For additional details,
refer to Note 21.
Amortization expense of intangible assets was $17.4 million, $4.5 million and $4.0 million for the years ended
December 31, 2024, 2023 and 2022, respectively. Estimated amortization for intangible assets with definite lives for the
next five years ended December 31, and thereafter, is as follows (in thousands):
2025
$
23,850
2026
23,655
2027
22,423
2028
21,437
2029
19,203
Thereafter
21,917
Total
$
132,485
80
Note 8 – Strategic Investments
Strategic investments include equity and debt investments in a number of non-public technology driven companies.
We generally account for strategic equity investments under the ASC 321 measurement alternative for equity securities
without readily determinable fair values, as there are no quoted market prices for the equity investments. The equity
investments are measured at cost less impairment, adjusted for observable price changes and are assessed for impairment
whenever events or changes in circumstances indicate that the fair value may be less than its carrying value.
For the debt security strategic investment, we have elected to account for this investment and the associated
embedded derivatives utilizing the fair value option. Unrealized changes in fair value for the entire hybrid instrument are
recorded within other income (loss), net in the consolidated statement of operations.
In conjunction with certain of our strategic investments, we may have the ability to commit additional capital over
time through warrants and call options; for some investments, the exercisability and exercise prices are conditional on the
achievement of certain performance metrics. Depending on their contractual terms, our warrants and call options may be
accounted for under either the ASC 321 measurement alternative or as derivative instruments under ASC 815.
The following tables provide a roll-forward of the balance of strategic investments (in thousands):
Year Ended December 31, 2024
Year Ended December 31, 2023
Equity
investments
Warrants
Call
options
Debt
investments
Total
Equity
investments
Warrants
Call
Options
Total
Balance, beginning of
period
$ 212,996 $ 1,501 $ 17,233 $
— $ 231,730 $ 277,676 $ 1,654 $ 17,233 $ 296,563
Investments
103,888
2,012
—
7,500 113,400
15,016
1,176
— 16,192
Fair value
adjustments:
Realized gains
(losses) during the
period, net
95,429
— (4,279)
— 91,150
—
—
—
—
Unrealized gains on
strategic investments
still held at the
reporting date
74,784
855
—
1,084 76,723
—
—
—
—
Unrealized losses on
strategic investments
still held at the
reporting date
(4,093)
—
(893)
—
(4,986) (81,196) (1,329)
— (82,525)
Exercises
(163,406)
— (12,061)
— (175,467)
1,500
—
—
1,500
Balance, end of period $ 319,598 $ 4,368 $
— $
8,584 $ 332,550 $ 212,996 $ 1,501 $ 17,233 $ 231,730
During the year ended December 31, 2024, we exercised call options and acquired the remaining outstanding stock of
two strategic investments - Fusus L.L.C. ("Fusus") and Dedrone Holdings, Inc. ("Dedrone"). Our pre-existing interests had
fair values at the acquisition dates of $63.3 million and $112.2 million, respectively. The acquisitions of Fusus and
Dedrone resulted in net non-taxable gains of $42.3 million and $51.6 million related to the existing strategic equity
investments and call options in Fusus and Dedrone, respectively. For additional discussion, refer to Note 21.
Additionally, as a result of an observable price change for a separate strategic investee, we recognized an unrealized
gain of $75.6 million for the strategic investment and related warrants in other income (loss), net on our consolidated
statement of operations during the year ended December 31, 2024.
For the debt security strategic investment, we recognized an unrealized gain of $1.1 million for the entire hybrid
instrument in other income (loss), net on our consolidated statement of operations during the year ended December 31,
2024.
81
Inception to date
Equity
investments
Warrants
Call options
Debt
investments
Total
Investments
$
325,105 $
6,235 $
17,232 $
7,500 $
356,072
Fair value adjustments:
Realized gains (losses) on strategic
investment transactions, net
107,741
—
(4,279)
—
103,462
Cumulative unrealized gains (losses)
63,203
88,298
(893)
1,084
151,692
Exercises
(161,905)
(90,165)
(12,060)
—
(264,130)
Sales
(14,546)
—
—
—
(14,546)
Balance, end of period
$
319,598 $
4,368 $
— $
8,584 $
332,550
Strategic investment cumulative unrealized net gains are comprised of upward adjustments of $240.7 million and
downward adjustments and impairments of $89.0 million.
Note 9 - Variable Interest Entities
We evaluate our investments and other significant relationships to determine whether any investee is a variable
interest entity (“VIE”). If we conclude that an investee is a VIE, we evaluate our power to direct the activities of the
investee, our obligation to absorb the expected losses of the investee and our right to receive the expected residual returns
of the investee to determine whether we are the primary beneficiary of the investee. If we are the primary beneficiary of a
VIE, we will consolidate such entity and reflect the non-controlling interest of other beneficiaries of that entity.
We determine whether we are the primary beneficiary of a VIE by performing an analysis that principally considers:
•
The VIE’s purpose, design, and risks the VIE was designed to create and pass through to its variable interest
holders;
•
The VIE’s capital structure;
•
The terms between the VIE and its variable interest holders and other parties involved with the VIE; and
•
Related party affiliations.
As of December 31, 2024 and December 31, 2023, the unconsolidated non-public VIEs in which we hold variable
interests were as follows (in thousands):
December 31,
2024
December 31,
2023
Carrying value of variable interest - assets(1)
$
25,171 $
4,986
(1)
Balance reflects the maximum exposure to loss, which is limited to the carrying value of the interest.
The primary purpose of our U.S.-based, unconsolidated VIE investments is to create strategic partnerships with
market-leading providers of law enforcement technology solutions. We present all variable interests in unconsolidated
VIEs as strategic investments within the long-term assets section of the consolidated balance sheets.
We have provided financial support to the unconsolidated VIEs in exchange for investments in debt and preferred
equity securities as well as warrants and call options that give us the ability to commit additional capital over time.
Financial support provided to the unconsolidated VIEs is used to continue to finance their operations.
82
Note 10 - Other Long-Term Assets
Other long-term assets consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
December 31,
2024
December 31,
2023
Deferred commissions
$
154,894 $
119,084
Operating lease assets
44,567
36,155
Deferred cost of goods sold
14,123
14,388
Cash surrender value of corporate-owned life insurance policies
8,398
7,558
Deferred implementation costs
1,305
2,175
Prepaid expenses, deposits and other
14,333
11,671
Total other long-term assets
$
237,620 $
191,031
Note 11 - Accrued Liabilities
Accrued liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
December 31,
2024
December 31,
2023
Accrued commissions
$
88,237 $
58,641
Accrued bonus
59,780
56,188
Accrued income and other taxes
27,863
5,784
Accrued salaries and benefits
25,233
10,807
Accrued inventory in transit
13,101
12,197
Accrued cloud hosting fees
10,673
8,530
Accrued warranty expense
8,284
7,374
Accrued consulting and IT fees
7,846
5,421
Other accrued expenses
38,176
28,608
Total accrued liabilities
$
279,193 $
193,550
83
Note 12 – Convertible Senior Notes
2027 Notes
In December 2022, we issued $690.0 million aggregate principal amount of our 2027 Notes (the "Notes") in a private
offering, which aggregate principal amount included the exercise in full of the initial purchasers’ option to purchase up to
an additional $90.0 million principal amount of the Notes. The Notes mature on December 15, 2027 and bear interest at a
fixed rate of 0.50% per annum, payable semiannually in arrears on June 15 and December 15 of each year, beginning on
June 15, 2023. The total net proceeds from the issuance of the Notes, after deducting initial purchasers’ discounts and
commissions and estimated debt issuance costs of $16.2 million, were approximately $673.8 million. The effective interest
rate for the Notes was 0.99% and included interest payable and amortization of debt issuance cost.
The terms of the Notes allow for conversion into common stock, cash, or a combination of cash and common stock,
at our option. On or after December 22, 2025, we may redeem for cash all or any portion of the notes in accordance with
the optional redemption terms of the convertible debt agreement.
December 31, 2024
Maturity Date
Initial Conversion
Price per Share
Initial Conversion
Rate per $1,000
Par Value
Initial Number of
Shares
2027 Notes
December 15, 2027
$228.73
4.3720 shares
3,016,680
The notes are convertible, in multiples of $1,000 principal amount, at the option of the holders prior to the close of
business on the business day immediately preceding September 15, 2027 only under the following circumstances:
•
during any calendar quarter commencing after the calendar quarter ending on March 31, 2023 (and only during
such fiscal quarter), if the last reported sale price per common stock exceeds 130% of the conversion price for
each of at least 20 trading days, whether or not consecutive, during the 30 consecutive trading days ending on, and
including, the last trading day of the immediately preceding calendar quarter;
•
any time preceding September 15, 2027, when during the five consecutive business days immediately after any 10
consecutive trading day period (the “Measurement Period”), if the trading price per $1,000 principal amount of
Notes for each trading day of the Measurement Period was less than 98% of the product of the last reported sale
price per share of common stock on such trading day and the conversion rate on such trading day;
•
upon the occurrence of certain corporate events or distributions on our ordinary shares, as provided in the
indenture governing the Notes;
•
if we call the Notes for redemption; or any time from, and including, September 15, 2027 until the close of
business on the second scheduled trading day immediately before the maturity date
If we undergo a fundamental change (as defined in the indenture governing the Notes), holders may require us to
repurchase for cash all or any portion of their Notes at a fundamental change repurchase price equal to 100% of the
principal amount of the Notes to be repurchased, plus accrued and unpaid interest, if any, up to but excluding the
fundamental change repurchase date. In addition, following certain corporate events or if we issue a notice of redemption,
it will increase the conversion rate for holders who elect to convert their Notes in connection with such corporate event or
during the relevant redemption period.
The following table summarizes the carrying value of the Notes (in thousands):
December 31,
2024
December 31,
2023
Principal
$
690,000 $
690,000
Unamortized debt issuance costs
(9,711)
(12,887)
Convertible notes carrying amount, net
$
680,289 $
677,113
84
We consider the fair value of the Notes to be a Level 2 measurement. The estimated fair value of the Notes at
December 31, 2024 and December 31, 2023 is based on the closing trading price per $1,000 of the Notes as of the last day
of trading for each period as follows (in millions):
December 31,
2024
December 31,
2023
2027 Notes
$
1,798.5 $
873.3
Interest expense related to the Notes was as follows (in thousands):
December 31,
2024
December 31,
2023
Contractual interest expense
$
3,451 $
3,450
Amortization of debt issuance costs
3,176
3,126
Total interest expense
$
6,627 $
6,576
Note Hedge
To reduce the impact of potential economic dilution upon conversion of the Notes, we entered into a convertible note
hedge transaction (the “Note Hedge” or “2027 Note Hedge”) with certain investment banks, with respect to our common
stock, concurrently with the issuance of the 2027 Notes.
Purchase Price
Shares Purchased
2027 Note Hedge
$
194,994
3,016,680
The Note Hedge covers shares of our common stock at a strike price per share that corresponds to the initial
conversion price of the respective Notes, subject to adjustment, and is exercisable upon conversion of the Notes. If
exercised, we may elect to receive cash, shares of our common stock, or a combination of cash and shares. We have
accounted for the aggregate amount of purchase price for the Note Hedge as a reduction to additional paid-in capital. The
Note Hedge will expire upon the maturity of the Notes. The Note Hedge is intended to reduce the potential economic
dilution upon conversion of the Notes in the event that the market value per share of our common stock at the time of
exercise is greater than the conversion price of the Notes. The Note Hedge is a separate transaction and is not part of the
terms of the Notes. Holders of the Notes do not have any rights with respect to the Note Hedge. The Note Hedge does not
impact earnings per share, as it was entered into to offset any dilution from the Notes. As of December 31, 2024, 3,016,680
shares remain subject to the Note Hedge.
Note Warrants
Proceeds
Shares
Strike Price
First Expiration
2027 Warrants
$
124,269
3,016,680
$
338.86
March 15, 2028
Separately, we entered into warrant transactions with certain investment banks, whereby we sold warrants to acquire,
subject to adjustment, the number of shares of our common stock shown in the table above. If the average market value per
share of our common stock exceeds the strike price of the Warrants, such Warrants would have a dilutive effect on our
earnings per share to the extent we report net income. According to the terms of the Warrants, the Warrants will be
automatically exercised over a 60-trading day period beginning on the first expiration date as set forth above.
Note 13 - Commitments and Contingencies
Cloud Service Commitments
In June 2022, we entered into a purchase agreement for cloud hosting with a six year term beginning July 1, 2022.
The purchase agreement includes a total commitment of $425.0 million. Storage fees under this agreement were $81.9
million for the year ended December 31, 2024. The remaining purchase commitment at December 31, 2024 was $265.5
million.
85
Purchase Commitments
We routinely enter into cancelable and non-cancelable purchase orders with many of our key vendors. Based on the
strategic relationships with many of these vendors, our ability to cancel these purchase orders and maintain a favorable
relationship would be limited. As of December 31, 2024, we had approximately $637.5 million of open purchase orders
and $272.1 million of other purchase obligations, inclusive of the data storage commitment noted above.
Product Litigation
As a manufacturer of weapons and other law enforcement tools used in high-risk field environments, we are often the
subject of products liability litigation concerning the use of our products. We are currently named as a defendant in two
such lawsuits in which the plaintiffs allege either wrongful death or personal injury in situations in which a TASER CED
was used by law enforcement officers in connection with arrests or training. While the facts vary from case to case, these
product liability claims typically allege defective product design, manufacturing, and/or failure to warn. They seek
compensatory and sometimes punitive damages, often in unspecified amounts.
We continue to aggressively defend all product litigation. As a general rule, it is our policy not to settle suspect injury
or death cases. Exceptions are sometimes made where the settlement is strategically beneficial to us. Due to the
confidential nature of our litigation strategy and the confidentiality agreements that are executed in the event of a
settlement, we do not identify or comment on specific settlements by case or amount. Based on current information, we do
not believe that the outcome of any such legal proceeding will have a material effect on our financial position, results of
operations or cash flows. We are self-insured for the first $5.0 million of any product claim made after 2014. No judgment
or settlement has ever exceeded this amount in any products liability case. We continue to maintain product liability
insurance coverage, including an insurance policy fronting arrangement, above our self-insured retention with various
limits depending on the policy period.
Other Matters
Despite the FTC’s dismissal of its administrative enforcement complaint against Axon without consent decree or
other condition in October 2023, other parties continue to allege that Axon’s May 2018 acquisition of an insolvent body
camera competitor, Vievu LLC, was anticompetitive. Two purported antitrust lawsuits based largely on the FTC’s
unproven allegations are pending in the District of New Jersey (Case No. 3:23-cv-7182) and District of Arizona (Case No.
2:24-cv-01869-SMB). Axon denies all allegations of anticompetitive or other misconduct and is vigorously defending the
cases.
Pending in the Eastern District of Virginia (Case No. 1:24-CV-01625) is a patent infringement suit filed by Airspace
Systems, Inc. against Dedrone Holdings, Inc. involving certain drone technology. After Axon acquired Dedrone on
October 1, 2024, Airspace amended its complaint and added Axon as a defendant. Axon and Dedrone deny infringement
and further contend that the three asserted patents are invalid and/or contain patent ineligible subject matter.
General
From time to time, we are notified that we may be a party to a lawsuit or that a claim is being made against us. After
carefully assessing the claim, and assuming we determine that we are not at fault or we disagree with the damages or relief
demanded, we vigorously defend any lawsuit filed against us. We record a liability when losses are deemed probable and
reasonably estimable. When losses are deemed reasonably possible but not probable, we determine whether it is possible to
provide an estimate of the amount of the loss or range of possible losses for the claim, if material for disclosure. In
evaluating matters for accrual and disclosure purposes, we take into consideration factors such as our historical experience
with matters of a similar nature, the specific facts and circumstances asserted, the likelihood of our prevailing, the
availability of insurance, and the severity of any potential loss. We reevaluate and update accruals as matters progress over
time.
Based on our assessment of outstanding litigation and claims as of December 31, 2024, we have determined that it is
not reasonably possible that these losses, if any, from lawsuits will individually, or in the aggregate, materially affect our
results of operations, financial condition or cash flows. However, the outcome of any litigation is inherently uncertain and
there can be no assurance that any expense, liability or damages that may ultimately result from the resolution of these
matters will be covered by our insurance or will not be in excess of amounts recognized or provided by insurance coverage
and will not have a material adverse effect on our operating results, financial condition or cash flows.
86
Off-Balance Sheet Arrangements
Under certain circumstances, we use letters of credit and surety bonds to guarantee our performance under various
contracts, principally in connection with the installation and integration of Axon cameras and related technologies. Certain
of our letters of credit and surety bonds have stated expiration dates with others being released as the contractual
performance terms are completed. At December 31, 2024, we had outstanding letters of credit issued under our credit
facility of $7.8 million that are expected to expire through 2026. We also had outstanding letters of credit of $0.1 million
that do not draw against our credit facility. Additionally, we had $20.9 million of outstanding surety bonds as of
December 31, 2024, with expiration dates ranging through 2029.
Note 14 - Income Taxes
Income before provision (benefit) for income taxes included the following components for the years ended
December 31 (in thousands):
2024
2023
2022
United States
$
357,484 $
134,509 $
191,353
Foreign
24,020
22,552
4,885
Total
$
381,504 $
157,061 $
196,238
Significant components of the provision (benefit) for income taxes were as follows for the years ended December 31
(in thousands):
2024
2023
2022
Current:
Federal
$
60,924 $
33,084 $
10,804
State
18,298
10,371
10,118
Foreign
3,388
2,804
2,892
Total current
82,610
46,259
23,814
Deferred:
Federal
(63,073)
(60,673)
26,180
State
(20,838)
(9,172)
(2,015)
Foreign
(1,815)
89
(2,146)
Total deferred
(85,726)
(69,756)
22,019
Tax impact of unrecorded tax benefits liability
7,586
4,775
3,475
Provision for (benefit from) income taxes
$
4,470 $
(18,722) $
49,308
87
A reconciliation of our effective income tax rate to the federal statutory rate follows for the years ended December 31
(in thousands):
2024
2023
2022
Federal income tax at the statutory rate
$
80,120
$
32,983
$
41,224
Excess stock-based compensation benefit
(83,748)
(106,522)
(4,616)
Executive compensation limitation
51,858
77,350
5,784
R&D credits
(36,571)
(26,204)
(13,340)
Nontaxable gain on investments
(19,727)
—
—
Change in unrecognized tax benefits
7,356
4,351
3,215
Other permanent differences
5,176
1,201
1,118
Global intangible low-taxed income
3,081
1,890
653
Foreign derived intangible income deduction
(2,558)
(961)
(2,597)
Foreign tax credit
(1,914)
(1,922)
—
State income taxes, net of federal benefit
1,713
3,730
7,915
Change in valuation allowance
(903)
(4,695)
10,216
Tax effects of intercompany transactions
(222)
(2,033)
(417)
Difference between statutory and foreign tax rates
801
1,013
(428)
Other
8
1,097
581
Provision for (benefit from) income taxes
$
4,470
$
(18,722)
$
49,308
Effective tax rate
1.2 %
(11.9) %
25.1 %
88
Significant components of our deferred income tax assets and liabilities are as follows at December 31, 2024 and
December 31, 2023 (in thousands):
2024
2023
Deferred income tax assets:
R&D capitalization, net
$
193,265 $
99,746
Deferred revenue
66,948
59,443
Stock-based compensation
51,088
10,544
Convertible debt, net
31,603
39,649
Reserves, accruals, and other
21,634
12,264
R&D tax credit carryforward
19,100
16,554
Net operating loss carryforward
17,824
2,115
Accrued bonus
12,101
11,253
Lease liability
11,966
9,664
Inventory reserve
5,794
1,986
Deferred compensation
4,021
2,803
Strategic investments
—
6,109
Amortization
—
4,425
Total gross deferred tax assets
435,344
276,555
Valuation allowance
(23,054)
(21,600)
Total deferred income tax assets, net of valuation allowance
412,290
254,955
Deferred income tax liabilities:
Strategic investments
(42,260)
—
Amortization
(36,185)
—
Depreciation
(16,739)
(14,575)
Right of use asset
(10,639)
(8,404)
Prepaid expenses
(2,874)
(2,223)
Customer contract asset
(1,174)
(690)
Goodwill amortization
(509)
(314)
Other
—
(965)
Total deferred income tax liabilities
(110,380)
(27,171)
Net deferred income tax assets
$
301,910 $
227,784
Deferred taxes are reflected in the consolidated balance sheet as follows:
Non-current tax assets (included in deferred tax asset, net)
304,282
227,784
Non-current tax liabilities (included in other long-term liabilities)
(2,372)
—
Total
$
301,910 $
227,784
The following table presents the valuation allowance activity for years ended December 31, 2024, 2023 and 2022 (in
thousands):
2024
2023
2022
Balance, beginning of period
$
21,600 $
26,368 $
16,168
Tax provision (benefit)
(576)
(4,262)
10,409
Deductions charged to tax provision / benefit
(327)
(505)
(164)
Additions (reversals) to other accounts
2,357
(1)
(45)
Balance, end of period
$
23,054 $
21,600 $
26,368
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As of December 31, 2024, we have recorded a net tax benefit totaling $17.8 million for U.S. federal, state, and
foreign net operating loss carryforwards ("NOLs"). As of December 31, 2024, $15.5 million of NOLs may be carried
forward indefinitely while the remaining $2.3 million will begin to expire at various times from 2036 through 2044. As of
December 31, 2024, we have a total of $26.1 million state (net of federal benefit) R&D credit carryforwards available to
offset future income taxes. A total of $2.5 million of the state R&D credits may be carried forward indefinitely while the
remaining $23.6 million will begin to expire at various times from 2025 through 2044.
As of December 31, 2024, we anticipate sufficient future pre-tax book income to realize a significant portion of our
deferred tax assets. However, as we have Arizona R&D tax credits expiring unutilized each year, unrealized investment
losses for which realization is uncertain, and specific identified intangibles with an indefinite life, we have recorded a 23.1
million valuation allowance against these specific deferred tax assets as of December 31, 2024.
The net change in total valuation allowance for the years ended December 31, 2024, and 2023 was an increase of $1.5
million and decrease of $4.8 million, respectively. The valuation allowance changes are driven primarily by certain state
R&D tax credits that are expected to expire unutilized, acquired state NOLs, and movement in deferred tax assets
associated with unrealized investment losses and transaction costs incurred in connection with certain investments that are
not more likely than not to be realized. Of the net change in the valuation allowance in 2024 and 2023, a decrease of $0.9
million and $4.8 million, respectively, was recorded to tax expense and an increase of $2.4 million and $0 million,
respectively, was recorded through the consolidated balance sheet.
We consider the undistributed earnings of certain non-U.S. subsidiaries to be indefinitely reinvested outside of the
United States based on estimates that future domestic cash generation will be sufficient to meet future domestic cash needs
and our specific plans for reinvestment of those subsidiary earnings. We project that our foreign earnings will be utilized
offshore for working capital and future foreign growth and we have not made a provision for U.S. or additional foreign
withholding taxes of the excess of the amount for financial reporting over the tax basis of investments in foreign
subsidiaries that is indefinitely reinvested. Generally, such amounts become subject to U.S. taxation upon the remittance of
dividends and under certain other circumstances. We have estimated the amount of deferred tax liability related to
investments in these foreign subsidiaries undistributed earnings is approximately $1.1 million. If we decide to repatriate the
undistributed foreign earnings, we will recognize the income tax effects in the period we change our assertion on indefinite
reinvestment.
We complete R&D tax credit studies for each year that an R&D tax credit is claimed for federal and state income tax
purposes. We have made the determination that it is not more likely than not that the full benefit of the R&D tax credit will
be sustained on examination. As such, we recorded a liability for unrecognized tax benefits of $32.7 million as of
December 31, 2024. We expect the amount of the unrecognized tax benefit to decrease by approximately $9.0 million
within the next 12 months due to statute of limitations expirations. Should the unrecognized benefit of $32.7 million be
recognized, our effective tax rate would be favorably impacted.
The following table presents a roll forward of our liability for unrecognized tax benefits, exclusive of accrued interest,
as of December 31 (in thousands):
2024
2023
2022
Balance, beginning of period
$
25,754 $
21,492 $
18,249
Increase (decrease) in previous year tax positions
501
(215)
232
Increase in current year tax positions
7,313
6,963
3,343
Decrease due to lapse of statute of limitations
(842)
(2,486)
(332)
Balance, end of period
$
32,726 $
25,754 $
21,492
Federal income tax returns for 2021 through 2023 remain open to examination by the U.S. Internal Revenue Service,
while state and local income tax returns for 2020 through 2023 also generally remain open to examination by state taxing
authorities. The 2010 through 2019 state and local income tax returns are only open to the extent that net operating losses
or other tax attributes carrying forward from those years were utilized in 2020 through 2023. The foreign tax returns for
2020 through 2023 also generally remain open to examination, although some foreign jurisdictions can audit returns up to
ten years.
90
We recognize interest and penalties related to unrecognized tax benefits within the provision (benefit) for income tax
expense line in the consolidated statements of operations and comprehensive income. We have recognized expense
(benefit), before federal tax impact, related to interest of $1.2 million, $0.3 million, and $0.1 million in 2024, 2023, and
2022 respectively. As of December 31, 2024, and 2023, we had accrued interest of $1.8 million and $0.6 million,
respectively.
As part of the OECD global minimum tax framework, certain jurisdictions in which we operate have enacted or are in
the process of implementing top-up tax provisions under Pillar Two. We have assessed the impact of these regulations on
our tax position and included an immaterial adjustment in our income tax provision as of December 31, 2024. We continue
to monitor legislative developments and will assess potential future impacts as additional guidance and implementation
details become available.
Note 15 - Line of Credit
In December 2022, we entered into a credit agreement that provides for a senior unsecured multi-currency revolving
credit facility (the "Credit Agreement") in an aggregate principal amount of up to $200.0 million, $30.0 million of which is
available for the issuance of letters of credit. The Credit Agreement will mature on the earlier of December 15, 2027 or the
date that is six months prior to the stated maturity date of the 2027 Notes unless the Notes have been redeemed,
repurchased, converted or defeased in full. Additionally, the credit agreement has an accordion feature that allows for an
increase in the total line of credit up to $300.0 million, in each lender’s sole discretion.
As of December 31, 2024, and 2023, respectively, no amounts were drawn under the Credit Agreement. Under the
terms of the line of credit, available borrowings are reduced by outstanding letters of credit. As of December 31, 2024, we
had letters of credit outstanding of approximately $7.8 million under the facility and available borrowing of $192.2 million,
excluding amounts available under the accordion feature. Advances under the line of credit bear interest at Term SOFR
plus 1.25 to 1.75% per year determined in accordance with a pricing grid based on our net debt to earnings before interest
expense, taxes, depreciation and amortization (“EBITDA”) ratio, which for the purposes of the Credit Agreement excludes
investment interest income. “SOFR” is defined as a rate equal to the secured overnight financing rate as administered by
the Federal Reserve Bank of New York or a successor administrator of the secured overnight financing rate.
We are required to comply with a net leverage ratio, defined as consolidated total indebtedness to EBITDA, of no
greater than 3.50 to 1.00 based upon a trailing four fiscal quarter period. At December 31, 2024, our net leverage ratio was
(0.17) to 1.00. Additionally, we must comply with a consolidated interest coverage ratio, defined as EBITDA to
consolidated interest expense, of no less than 3.50 to 1.00 based upon a trailing four fiscal quarter end. At December 31,
2024, our consolidated interest coverage ratio was 71.07 to 1.00.
Note 16 - Stockholders’ Equity
Common Stock and Preferred Stock
We have authorized the issuance of two classes of stock designated as “common stock” and “preferred stock,” each
having a par value of $0.00001 per share. We are authorized to issue 200 million shares of common stock and 25 million
shares of preferred stock.
2018 CEO Performance Award
As of December 31, 2024, no unrecognized stock-based compensation expense remained under the 2018 CEO
Performance Award. Furthermore, no performance-based stock options were awarded during the years ended
December 31, 2024, 2023 or 2022.
2024 Employee XSP and 2024 CEO Performance Award
The 2024 Employee XSP includes an approved pool of 4.5 million shares of common stock reserved for grants of
XSUs to employees. A total of approximately 4.1 million XSUs were granted in the year ended December 31, 2024. The
91
program includes seven substantially equal tranches that will vest upon certification by the Compensation Committee upon
achievement of three independent vesting conditions, described in the following table:
Operational Goals(1)
(in millions)
Stock Price
Goal
Minimum Service Requirement
Tranche
Revenue
Adj.
EBITDA(2)
Employee XSP
CEO Award
Goal Expiration
1
$1,834
or
$382
and
$247.40
and
June 2025
December 2028
December 31, 2026
2
2,293
or
497
and
309.25
and
December 2025
December 2028
December 31, 2027
3
2,866
or
644
and
386.56
and
June 2026
December 2029
December 31, 2028
4
3,583
or
834
and
483.20
and
December 2026
December 2029
December 31, 2029
5
4,479
or
1,077
and
604.00
and
June 2027
December 2030
December 31, 2030
6
5,599
or
1,389
and
755.00
and
December 2027
December 2030
December 31, 2031
7
6,999
or
1,739
and
943.75
and
June 2028
December 2030
December 31, 2032
(1)
Operational goals are measured, as of any date, for the previous four consecutive fiscal quarters, beginning with the
Company's first full fiscal quarter ending after the fiscal quarter in which the grant date occurred
(2)
In connection with certain acquisitions which were completed during fiscal year 2024, the Adjusted EBITDA goals
were adjusted as required by the terms of the 2024 Employee XSP and 2024 CEO Performance Award
Additionally, 679,102 XSUs were granted to our CEO, Patrick W. Smith, pursuant to the terms of the 2024 CEO
Performance Award. The stock price goals and operational goals applicable to the 2024 CEO Performance Award are
identical to those under the 2024 Employee XSP described above, but Mr. Smith is subject to a longer minimum required
service period.
Restricted Stock Units
The following table summarizes RSU activity for the years ended December 31 (number of units and aggregate
intrinsic value in thousands):
2024
2023
2022
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Units outstanding, beginning of year
1,615 $
193.09
1,565 $
145.48
1,115 $
133.40
Granted
1,131
440.76
915
227.62
1,142
143.03
Released
(909)
196.35
(740)
140.81
(541)
117.49
Forfeited
(153)
208.12
(125)
157.95
(151)
138.99
Units outstanding, end of year
1,684
356.31
1,615
193.09
1,565
145.48
Aggregate intrinsic value at year end
$ 1,000,769
Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $594.32
per share, multiplied by the number of RSUs outstanding. The fair value as of the respective vesting dates of RSUs that
vested during the year was $426.3 million, $161.7 million, and $84.9 million for the years ended December 31, 2024, 2023
and 2022, respectively.
As of December 31, 2024, we had $530.4 million of total unrecognized stock-based compensation expense related to
RSUs under our stock plans for shares that are expected to vest. We expect to recognize the cost related to the RSUs over a
weighted average period of 2.31 years. Shares underlying RSUs are generally released when vesting requirements are met.
Certain RSUs that vested in the year ended December 31, 2024 were net-share settled, such that we withheld shares to
cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the
appropriate taxing authorities. Total shares withheld related to RSUs during 2024 were 122,020 and had a value of
approximately $58.1 million on their respective vesting dates as determined by the closing stock price on such dates.
92
Payments for the employees’ tax obligations are reflected as a financing activity within the consolidated statements of cash
flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.
Performance Stock Units
The following table summarizes PSU activity, inclusive of XSUs, for the years ended December 31 (number of units
and aggregate intrinsic value in thousands):
2024
2023
2022
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Number
of
Units
Weighted
Average
Grant-Date
Fair Value
Units outstanding, beginning of year
394 $
201.61
1,369 $
43.43
1,499 $
39.86
Granted
4,888
263.13
319
218.04
158
106.57
Released
(23)
140.90
(1,238)
37.98
(78)
107.58
Forfeited
(394)
232.94
(56)
48.40
(210)
41.62
Units outstanding, end of year
4,865
261.18
394
201.61
1,369
43.43
Aggregate intrinsic value at year end
$ 2,891,142
Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $594.32
per share, multiplied by the number of PSUs outstanding. The fair value as of the respective vesting dates of PSUs that
vested during the year was $8.4 million, $256.5 million, and $10.2 million for the years ended December 31, 2024, 2023
and 2022, respectively. As of December 31, 2024, there was $756.2 million in total unrecognized stock-based
compensation expense related to PSUs under our stock plans for shares that are expected to vest. We expect to recognize
the cost related to the PSUs over a weighted average period of 4.24 years. Shares underlying PSUs are released when
vesting requirements are met.
Certain PSUs that vested in the year ended December 31, 2024 were net-share settled such that we withheld shares to
cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the
appropriate taxing authorities. Total shares withheld related to PSUs were approximately 370 and had a value of $0.1
million on their respective vesting dates as determined by the closing stock price on such dates. Payments for the
employees’ tax obligations are reflected as a financing activity within the consolidated statements of cash flows. We record
a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.
Stock Option Activity
The following table summarizes stock option activity for the years ended December 31 (number of options in
thousands):
2024
2023
2022
Number
of
Options
Weighted
Average
Exercise
Price
Number
of
Options
Weighted
Average
Exercise
Price
Number
of
Options
Weighted
Average
Exercise
Price
Options outstanding, beginning of year
531 $
28.58
2,438 $
28.58
2,438 $
28.58
Granted
—
—
—
—
—
Exercised
(510)
28.58
(1,907)
28.58
—
—
Expired / terminated
—
—
—
—
—
Options outstanding, end of year
21
28.58
531
28.58
2,438
28.58
Options exercisable, end of year
21
28.58
531
28.58
1,377
28.58
We did not grant any stock options in 2024, 2023 or 2022. The total intrinsic value of options exercised was $178.1
million and $323.0 million for the years ended December 31, 2024 and 2023, respectively; no options were exercised in the
year ending December 31, 2022. The intrinsic value for options exercised was calculated as the difference between the
exercise price of the underlying stock option awards and the market price of our common stock on the date of exercise.
93
The following table summarizes information about stock options that were fully vested or expected to vest as of
December 31, 2024 (number of options in thousands):
Options Outstanding
Options Exercisable
Range of
Exercise Price
Number of
Options
Outstanding
Weighted
Average
Exercise
Price
Average
Remaining
Contractual
Life (Years)
Weighted
Number of
Options
Exercisable
Average
Exercise
Price
Average
Remaining
Contractual
Life (Years)
$28.58
21
$
28.58
3.15
21
$
28.58
3.15
The aggregate intrinsic value of options exercisable at December 31, 2024 was $11.8 million. Aggregate intrinsic
value represents the difference between the exercise price of the underlying stock option awards and the closing market
price of our common stock of $594.32 on the last trading day for the period ending December 31, 2024.
Stock-based Compensation Expense
We account for stock-based compensation using the fair-value method. Reported stock-based compensation expense
was classified as follows for the years ended December 31 (in thousands):
2024
2023
2022
Cost of product and service sales
$
60,089 $
6,595 $
4,607
Selling, general and administrative expenses
190,561
58,533
51,301
Research and development expenses
131,954
66,230
50,268
Total stock-based compensation expense
$
382,604 $
131,358 $
106,176
Income tax benefit
$
79,275 $
13,509 $
25,154
Stock Incentive Plan
In May 2024, our shareholders approved the Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan
(the “Amended 2022 Plan”) authorizing an additional 2.2 million shares, plus remaining available shares under prior plans,
for issuance under the Amended 2022 Plan. Combined with the shares of our common stock remaining available under our
legacy stock incentive plans, there are 3.2 million shares available for grant as of December 31, 2024.
At-the-Market Equity Offering
We participate in an “at-the-market” equity offering program (the “ATM”), pursuant to which we are authorized to
sell up to a total of approximately 2.0 million shares of our common stock. During the year ended December 31, 2024, no
shares were sold under the ATM. During the year ended December 31, 2023, 467,594 shares of our common stock were
sold under the ATM. We generated approximately $96.4 million in aggregate gross proceeds from these sales. Aggregate
net proceeds were $94.7 million after deducting related expenses, including commissions to the sales agent and issuance
costs of $1.7 million. During the year ended December 31, 2022, no shares were sold under the ATM.
We intend to use the net proceeds from the ATM for general corporate purposes, which may include, among other
things, providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock
compensation awards granted to our executive officers and other employees under our stock plans, to support our growth,
and to acquire or invest in product lines, services, technologies or facilities.
Stock Repurchase Plan
In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our
outstanding common stock subject to stock market conditions and corporate considerations. As of December 31, 2024 and
2023, $16.3 million remained available under the plan for future purchases.
94
Note 17 – Accumulated Other Comprehensive Loss
The following table reflects the changes in accumulated other comprehensive loss, net of tax (in thousands):
Unrealized Gains (Losses)
on Available-for-Sale
Investments (1)
Foreign Currency
Translation
Total
Balance, December 31, 2021
$
(207) $
(1,110) $
(1,317)
Other comprehensive loss
(1,044)
(4,818)
(5,862)
Balance, December 31, 2022
$
(1,251) $
(5,928) $
(7,179)
Other comprehensive income (loss)
852
(4,352)
(3,500)
Balance, December 31, 2023
$
(399) $
(10,280) $
(10,679)
Other comprehensive income (loss)
369
(7,874)
(7,505)
Balance, December 31, 2024
$
(30) $
(18,154) $
(18,184)
(1)
Amounts are net of immaterial tax impacts
Note 18 - Leases
We have operating leases for office space, manufacturing and logistical functions. Operating lease assets and
liabilities consisted of the following at December 31, 2024 and December 31, 2023 (in thousands):
Leases (in thousands)
Classification
December 31,
2024
December 31,
2023
Assets
Operating lease assets
Other assets
$
44,567 $
36,155
Liabilities
Current
Operating
Other current liabilities
$
9,453 $
7,938
Noncurrent
Operating
Long-term lease liabilities
41,383
33,550
Total lease liabilities
$
50,836 $
41,488
The components of operating lease expenses were as follows for the years ended December 31 (in thousands):
2024
2023
2022
Total operating lease expense (1)
$
14,568 $
10,025 $
8,703
(1)
Includes short-term leases, which are immaterial
Supplemental cash flow information related to operating leases were as follows for the year ended December 31 (in
thousands):
2024
2023
2022
Cash paid for amounts included in the measurement of lease
liabilities:
Operating cash flows for operating leases
$
12,284 $
8,846 $
9,216
Right-of-use assets obtained in exchange for lease liabilities:
Operating leases
$
14,292 $
5,927 $
21,815
Weighted-average remaining lease term and discount rate at December 31, 2024 and December 31, 2023 were as
follows:
95
December 31,
2024
December 31,
2023
Weighted average remaining lease term:
Operating leases
7.7 years
7.1 years
Weighted average discount rate:
Operating leases
7.60 %
6.05 %
Future minimum operating lease payments under non-cancellable leases as of December 31, 2024 were as follows (in
thousands):
Operating
2025
13,791
2026
8,994
2027
6,606
2028
6,120
2029
5,546
Thereafter
28,409
Total minimum lease payments
69,466
Less: Amount representing interest
(18,630)
Present value of lease payments
$
50,836
Note 19 - Employee Benefit Plans
We have a defined contribution profit sharing 401(k) plan for eligible employees, which is qualified under Sections
401(a) and 401(k) of the Internal Revenue Code of 1986, as amended. Employees are entitled to make tax-deferred
contributions of their eligible compensation up to the maximum allowed by law. We also sponsor defined contribution
plans in certain of our international subsidiaries.
Our matching contributions for all defined contribution plans for the years ended December 31, 2024, 2023 and 2022,
were approximately $17.2 million, $14.5 million and $10.9 million, respectively.
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Note 20 - Segment Data
Information relative to our reportable segments was as follows (in thousands):
For the year ended December 31, 2024
TASER
Software and
Sensors
Total
Net sales from products
$
763,761 $
457,531 $
1,221,292
Net sales from services
54,912
806,322
861,234
Net sales
818,673
1,263,853
2,082,526
Cost of sales
338,642
502,504
841,146
Other segment items(1)
34,937
39,130
74,067
Adjusted gross margin
$
514,968 $
800,479 $
1,315,447
Other segment items(1)
74,067
Selling, general and administrative
741,247
Research and development
441,593
Interest income, net
36,595
Other income (loss), net
286,369
Income before provision for income taxes
$
381,504
(1)
Other segment items includes the adjustment for noncash stock-based compensation expense, amortization of
acquired intangible assets, and inventory step-up amortization related to acquisitions to arrive at the profit measure
used by the CODM
For the year ended December 31, 2023
TASER
Software and
Sensors
Total
Net sales from products
$
577,610 $
386,392 $
964,002
Net sales from services
35,900
560,797
596,697
Net sales
613,510
947,189
1,560,699
Cost of sales
241,977
363,269
605,246
Other segment items(1)
2,235
7,504
9,739
Adjusted gross margin
$
373,768 $
591,424 $
965,192
Other segment items(1)
9,739
Selling, general and administrative
494,884
Research and development
303,719
Interest income, net
42,112
Other income (loss), net
(41,901)
Income before provision for income taxes
$
157,061
(1)
Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of
acquired intangible assets to arrive at the profit measure used by the CODM
97
For the year ended December 31, 2022
TASER
Software and
Sensors
Total
Net sales from products
$
511,057 $
286,120 $
797,177
Net sales from services
19,987
369,979
389,966
Net sales
531,044
656,099
1,187,143
Cost of sales
195,239
265,791
461,030
Other segment items(1)
1,562
5,708
7,270
Adjusted gross margin
$
337,367 $
396,016 $
733,383
Other segment items(1)
7,270
Selling, general and administrative
399,330
Research and development
233,810
Interest income, net
4,294
Other income (loss), net
98,971
Income before provision for income taxes
$
196,238
(1)
Other segment items includes the adjustment for noncash stock-based compensation expense and amortization of
acquired intangible assets to arrive at the profit measure used by the CODM
The following table presents supplemental information included within the measure of profit or loss, adjusted gross margin,
reviewed by our CODM (in thousands). There are no other material items presented to our CODM by segment or included
within adjusted gross margin for supplemental disclosure.
Year Ended December 31, 2024
Year Ended December 31, 2023
Year Ended December 31, 2022
TASER
Software
and
Sensors
Total
TASER
Software
and
Sensors
Total
TASER
Software
and
Sensors
Total
Depreciation and amortization $ 18,789 $ 16,592 $ 35,381 $ 12,346 $ 5,223 $ 17,569 $ 7,049 $ 4,082 $ 11,131
Significant noncash items:
Stock-based compensation
expense
34,906 25,183 60,089 2,234
4,361 6,595 1,561
3,046 4,607
Provisions for inventory
4,508 12,091 16,599 3,642
752 4,394
—
—
—
Warranty reserve expense
4,743
849 5,592 7,325
737 8,062
53
145
198
Note 21 – Business Combinations
The consolidated financial statements include the operating results of each acquisition from the date of acquisition
noted below. Pro forma results of operations and the revenue and net income subsequent to the acquisitions have not been
presented because the effects of the acquisitions were not material to our financial results.
Fusus
On January 31, 2024, we acquired the remaining 79.7% interest in Fusus, a global leader in real-time crime center
technology, for incremental consideration transferred of approximately $241.3 million (the “Fusus step acquisition”). Our
existing 20.3% interest had a fair value at the acquisition date of $63.3 million, which resulted in a non-taxable gain of
$42.3 million recorded in other income (loss), net in our consolidated statement of operations. The fair value of the
previously held investment was remeasured using Level 3 valuation techniques, which include inputs to the valuation
methodology that are considered unobservable and significant to the fair value measurement.
The acquisition expands our ability to aggregate live video, data and sensor feeds, which enhances situational
awareness and investigative capabilities for our customers in public safety, education and enterprise. Total acquisition-
98
related transaction and integration costs for the years ended December 31, 2024 and 2023 were $4.7 million and $2.6
million, respectively. These transaction costs were expensed as incurred in SG&A in our consolidated statements of
operations.
The purchase price allocation was subject to revision during the measurement period through the fourth quarter of
2024. Based on the final purchase price allocation, we recorded $249.9 million of goodwill, $72.9 million of identifiable
intangible assets, and other net liabilities assumed of $7.8 million, excluding deferred taxes. We also recorded a net
deferred tax liability of $10.4 million.
The identifiable intangible assets included $56.6 million of developed technology, $14.4 million of customer
relationships, and $1.9 million of trademarks. With the assistance of third-party valuation experts, we calculated the fair
values of the intangible assets using the multi-period excess earnings method for the acquired developed technology, the
with and without method for the customer relationships, and the relief-from-royalty method for the trademarks. The
valuation of acquired intangible assets utilized Level 3 valuation techniques, which include inputs to the valuation
methodology that are considered unobservable and significant to the fair value measurement. Significant assumptions used
by management in the Fusus developed technology multi-period excess earnings (income valuation) approach were
projected revenues, earnings before interest, taxes, and depreciation and amortization (EBITDA) margins, obsolescence
technology factor, and the discount rate. The weighted average amortization period of the acquired intangible assets as of
the acquisition date was 7.5 years.
The goodwill generated from the acquisition is primarily attributable to synergies that are expected to be achieved
from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the
consolidated results of Fusus are included in our Software and Sensors operating segment following the acquisition.
Dedrone
On October 1, 2024, we acquired the remaining 79.8% interest in Dedrone, a global leader in air space security, for
incremental consideration transferred of approximately $391.1 million, subject to customary purchase price adjustments
(the “Dedrone step acquisition”). Our existing 20.2% interest had a fair value at the acquisition date of $112.2 million,
which resulted in a non-taxable gain of $51.6 million recorded in other income (loss), net in our consolidated statement of
operations. The fair value of the previously held investment was remeasured using Level 3 valuation techniques, which
include inputs to the valuation methodology that are considered unobservable and significant to the fair value
measurement.
This acquisition represents alignment to our mission and positions us to accelerate the next generation of drone and
air space solutions. Total acquisition-related transaction and integration costs were $13.0 million for the year ended
December 31, 2024. These transaction costs were expensed as incurred in SG&A in our consolidated statements of
operations.
The purchase price allocation is subject to revision during the measurement period for normal closing activities, such
as income tax filings and settlement of escrow balances, which is expected to be completed by the third quarter of 2025.
Based on the initial purchase price allocation, we recorded $451.1 million of goodwill, $100.5 million of identifiable
intangible assets, and other net liabilities assumed of $47.1 million, excluding deferred taxes. We also recorded a net
deferred tax liability of $1.2 million.
The identifiable intangible assets included $41.0 million of developed technology, $41.0 million of in-process
research and development, $15.0 million of customer relationships, and $3.5 million of trademarks. With the assistance of
third-party valuation experts, we calculated the fair values of the intangible assets using the primary method of cost
approach for the developed technology and in-process research and development, the with and without method for
customer relationships, and the relief-from-royalty method for the trademarks. The valuation of the developed technology
and in-process research and development was also supported by an income approach. The valuation of acquired intangible
assets utilized Level 3 valuation techniques, which include inputs and assumptions to the valuation methodology that are
considered unobservable and significant to the fair value measurement. The significant assumption used by management in
the Dedrone developed technology and IPR&D cost approaches was direct development cost build-up. The weighted
average amortization period of the acquired intangible assets as of the acquisition date was 5.5 years.
The acquired in-process research and development projects represent projects that are expected to enhance our drone
capabilities, have not yet been completed for commercialization, and are required to be classified as indefinite-lived assets
99
until their successful completion. These projects are expected to be placed in service and begin amortizing once they are
commercialized and begin contributing to our cash inflows during 2025.
The goodwill generated from the acquisition is primarily attributable to synergies that are expected to be achieved
from the integration of the business and is not deductible for tax purposes. Consistent with the assignment of goodwill, the
consolidated results of Dedrone are included in our Software and Sensors operating segment following the acquisition.
Note 22 – Subsequent Events
In February 2025, we entered into a series of transactions to acquire additional equity interests in an existing strategic
investee for an aggregate amount of $173.3 million. The closing of one of these transactions is contingent upon regulatory
approval that is expected to be received in March 2025.
Note 23 - Revision of Prior Period Financial Statements
As discussed in Note 1, in preparing the condensed consolidated financial statements as of and for the three and nine
months ended September 30, 2024, we identified errors in our previously issued financial statements related to our
historical conclusions of principal vs. agent accounting of certain reseller arrangements under ASC 606 and concluded they
were not material to any previously issued financial statements. The identified errors impacted our previously issued 2021
and 2022 annual financial statements, 2023 quarterly and annual financial statements, and 2024 quarterly financial
statements through June 30, 2024. Consistent with revising our quarterly financial statements as of September 30, 2024, we
made adjustments to the prior period amounts presented in these financial statements accordingly. Furthermore, we made
adjustments to correct for other previously identified immaterial errors.
The following tables reflect the impact of the revision to the specific line items presented in our previously reported
(a) consolidated balance sheet as of December 31, 2023; (b) consolidated statements of operations and comprehensive
income for the years ended December 31, 2023 and December 31, 2022; (c) consolidated statements of stockholders' equity
for the years ended December 31, 2023 and December 31, 2022; and (d) consolidated statements of cash flows for the
years ended December 31, 2023 and December 31, 2022.
100
Consolidated Balance Sheet
(in thousands)
As of December 31, 2023
As Reported
Revision
As Revised
Accounts and notes receivable, net of allowance of $2,392 as of
December 31, 2023
$
417,690 $
(4,729) $
412,961
Contract assets, net
275,779
11,453
287,232
Prepaid expenses and other current assets
112,786
(9,731)
103,055
Total current assets
2,396,649
(3,007)
2,393,642
Deferred tax assets, net
229,513
(1,729)
227,784
Long-term contract assets, net
77,710
6,672
84,382
Other long-term assets
220,638
(29,607)
191,031
Total assets
3,436,845
(27,671)
3,409,174
Accounts payable
88,326
(22,474)
65,852
Accrued liabilities
188,230
5,320
193,550
Current portion of deferred revenue
491,691
(21,276)
470,415
Total current liabilities
799,969
(38,430)
761,539
Deferred revenue, net of current portion
281,852
(10,951)
270,901
Other long-term liabilities
2,936
17,979
20,915
Total liabilities
1,824,811
(31,402)
1,793,409
Retained earnings
431,249
3,731
434,980
Total stockholders’ equity
1,612,034
3,731
1,615,765
Total liabilities and stockholders’ equity
$
3,436,845 $
(27,671) $
3,409,174
Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
Year Ended December 31, 2023
As Reported
Revision
As Revised
Net sales from products
$
967,711 $
(3,709) $
964,002
Net sales from services
595,680
1,017
596,697
Net sales
1,563,391
(2,692)
1,560,699
Cost of product sales
450,718
(3,010)
447,708
Cost of service sales
157,291
247
157,538
Cost of sales
608,009
(2,763)
605,246
Gross margin
955,382
71
955,453
Selling, general and administrative
496,874
(1,990)
494,884
Total operating expenses
800,593
(1,990)
798,603
Income from operations
154,789
2,061
156,850
Income before provision for income taxes
155,000
2,061
157,061
Provision for (benefit from) income taxes
(19,227)
505
(18,722)
Net income
$
174,227 $
1,556 $
175,783
Net income per common and common equivalent shares - Basic
$
2.35 $
0.02 $
2.37
Net income per common and common equivalent shares - Diluted
$
2.31 $
0.02 $
2.33
Comprehensive income
$
170,727 $
1,556 $
172,283
101
Year Ended December 31, 2022
As Reported
Revision
As Revised
Net sales from products
$
801,388 $
(4,211) $
797,177
Net sales from services
388,547
1,419
389,966
Net sales
1,189,935
(2,792)
1,187,143
Cost of product sales
363,219
(2,310)
360,909
Cost of service sales
98,078
2,043
100,121
Cost of sales
461,297
(267)
461,030
Gross margin
728,638
(2,525)
726,113
Selling, general and administrative
401,575
(2,245)
399,330
Total operating expenses
635,385
(2,245)
633,140
Income from operations
93,253
(280)
92,973
Income before provision for income taxes
196,518
(280)
196,238
Provision for (benefit from) income taxes
49,379
(71)
49,308
Net income
$
147,139 $
(209) $
146,930
Comprehensive income
$
141,277 $
(209) $
141,068
There was no impact on disclosed basic and diluted income per common and common equivalent shares for the year ended
December 31, 2022.
Consolidated Statements of Stockholders' Equity
(in thousands)
As Reported
Revision
As Revised
Retained
Earnings
Total
Stockholders’
Equity
Retained
Earnings
Total
Stockholders’
Equity
Retained
Earnings
Total
Stockholders’
Equity
Balance, December 31, 2021
$
109,883 $
1,047,849 $
2,384 $
2,384 $
112,267 $
1,050,233
Net income
147,139
147,139
(209)
(209)
146,930
146,930
Balance, December 31, 2022
257,022
1,268,491
2,175
2,175
259,197
1,270,666
Net income
174,227
174,227
1,556
1,556
175,783
175,783
Balance, December 31, 2023
$
431,249 $
1,612,034 $
3,731 $
3,731 $
434,980 $
1,615,765
102
Consolidated Statements of Cash Flows
(in thousands)
Year Ended December 31, 2023
As Reported
Revision
As Revised
Cash flows from operating activities:
Net income
$
174,227 $
1,556 $
175,783
Deferred income taxes
(73,002)
505
(72,497)
Provision for bad debts and inventory
1,090
4,394
5,484
Change in assets and liabilities:
Receivables and contract assets
(172,524)
(6,465)
(178,989)
Inventory
(71,896)
(5,730)
(77,626)
Deferred revenue
164,043
(17,224)
146,819
Accounts payable, accrued and other liabilities
64,384
945
65,329
Other - net
(102,370)
22,019
(80,351)
Net cash provided by operating activities
$
189,263 $
— $
189,263
Other than the impact to the captions noted above, there was no impact on total cash flows from operating activities, or to
cash flows from investing or financing activities.
Year Ended December 31, 2022
As Reported
Revision
As Revised
Cash flows from operating activities:
Net income
$
147,139 $
(209) $
146,930
Deferred income taxes
22,090
(71)
22,019
Provision for bad debts and inventory
699
2
701
Change in assets and liabilities:
Receivables and contract assets
(73,228)
(4,998)
(78,226)
Inventory
(95,987)
976
(95,011)
Deferred revenue
159,718
(4,152)
155,566
Accounts payable, accrued and other liabilities
80,757
221
80,978
Other - net
(52,207)
8,231
(43,976)
Net cash provided by operating activities
$
235,361 $
— $
235,361
Other than the impact to the captions noted above, there was no impact on total cash flows from operating activities, or to
cash flows from investing or financing activities.
103
Note 24 - Impact of Revision on Quarterly Statements of Operations and Comprehensive Income (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income
(in thousands, except per share data)
As Reported
Three Months Ended
December 31,
2024
September 30,
2024
Net sales
$
575,145 $
544,274
Gross margin
345,849
330,747
Income (loss) from operations
(15,755)
24,081
Net income
135,184
67,025
Net income per common and common equivalent shares - Basic
$
1.77 $
0.89
Net income per common and common equivalent shares - Diluted
$
1.67 $
0.86
As discussed within Note 1, we recorded an out of period adjustment in the three months ended December 31, 2024. This
adjustment reduced revenue and net income by $5.1 million and $3.7 million, respectively. Of this total adjustment,
$3.3 million and $2.3 million for revenue and net income, respectively, pertained to prior fiscal years. These errors
originated in prior years and were immaterial to each respective prior period.
Three Months Ended June 30, 2024
As Reported
Revision
As Revised
Net sales from products
$
295,185 $
(2,422) $
292,763
Net sales from services
208,914
1,559
210,473
Net sales
504,099
(863)
503,236
Cost of product sales
145,154
(2,527)
142,627
Cost of service sales
55,210
(757)
54,453
Cost of sales
200,364
(3,284)
197,080
Gross margin
303,735
2,421
306,156
Sales, general and administrative
169,427
1,537
170,964
Total operating expenses
270,861
1,537
272,398
Income from operations
32,874
884
33,758
Income before provision for income taxes
50,590
884
51,474
Provision for (benefit from) income taxes
9,793
208
10,001
Net income
$
40,797 $
676 $
41,473
Net income per common and common equivalent shares - Basic
$
0.54 $
0.01 $
0.55
Net income per common and common equivalent shares - Diluted
$
0.53 $
— $
0.53
Comprehensive income
$
38,189 $
676 $
38,865
104
Three Months Ended March 31, 2024
As Reported
Revision
As Revised
Net sales from products
$
272,048 $
(1,624) $
270,424
Net sales from services
188,688
759
189,447
Net sales
460,736
(865)
459,871
Cost of product sales
151,698
462
152,160
Cost of service sales
48,992
91
49,083
Cost of sales
200,690
553
201,243
Gross margin
260,046
(1,418)
258,628
Sales, general and administrative
152,669
(1,594)
151,075
Total operating expenses
243,766
(1,594)
242,172
Income from operations
16,280
176
16,456
Income before provision for income taxes
165,720
176
165,896
Provision for (benefit from) income taxes
32,502
42
32,544
Net income
$
133,218 $
134 $
133,352
Net income per common and common equivalent shares - Basic
$
1.77 $
— $
1.77
Net income per common and common equivalent shares - Diluted
$
1.73 $
— $
1.73
Comprehensive income
$
132,311 $
134 $
132,445
Three Months Ended December 31, 2023
As Reported
Revision
As Revised
Net sales from products
$
258,405 $
(1,966) $
256,439
Net sales from services
173,737
200
173,937
Net sales
432,142
(1,766)
430,376
Cost of product sales
125,664
(1,764)
123,900
Cost of service sales
42,591
(107)
42,484
Cost of sales
168,255
(1,871)
166,384
Gross margin
263,887
105
263,992
Sales, general and administrative
137,106
167
137,273
Total operating expenses
221,078
167
221,245
Income from operations
42,809
(62)
42,747
Income before provision for income taxes
55,802
(62)
55,740
Provision for (benefit from) income taxes
(1,469)
148
(1,321)
Net income
$
57,271 $
(210) $
57,061
Net income per common and common equivalent shares - Basic
$
0.76 $
— $
0.76
Net income per common and common equivalent shares - Diluted
$
0.75 $
— $
0.75
Comprehensive income
$
59,461 $
(210) $
59,251
105
Three Months Ended September 30, 2023
As Reported
Revision
As Revised
Net sales from products
$
256,443 $
(1,388) $
255,055
Net sales from services
157,158
1,065
158,223
Net sales
413,601
(323)
413,278
Cost of product sales
116,278
(1,665)
114,613
Cost of service sales
42,051
(42)
42,009
Cost of sales
158,329
(1,707)
156,622
Gross margin
255,272
1,384
256,656
Sales, general and administrative
123,279
(922)
122,357
Total operating expenses
200,159
(922)
199,237
Income from operations
55,113
2,306
57,419
Income before provision for income taxes
69,423
2,306
71,729
Provision for (benefit from) income taxes
10,026
394
10,420
Net income
$
59,397 $
1,912 $
61,309
Net income per common and common equivalent shares - Basic
$
0.79 $
0.03 $
0.82
Net income per common and common equivalent shares - Diluted
$
0.78 $
0.03 $
0.81
Comprehensive income
$
53,254 $
1,912 $
55,166
Three Months Ended June 30, 2023
As Reported
Revision
As Revised
Net sales from products
$
233,474 $
214 $
233,688
Net sales from services
141,131
(2,115)
139,016
Net sales
374,605
(1,901)
372,704
Cost of product sales
101,192
(254)
100,938
Cost of service sales
41,292
133
41,425
Cost of sales
142,484
(121)
142,363
Gross margin
232,121
(1,780)
230,341
Sales, general and administrative
119,922
(614)
119,308
Total operating expenses
191,862
(614)
191,248
Income from operations
40,259
(1,166)
39,093
Income (loss) before provision for income taxes
(12,109)
(1,166)
(13,275)
Provision for (benefit from) income taxes
(24,529)
(260)
(24,789)
Net income
$
12,420 $
(906) $
11,514
Net income per common and common equivalent shares - Basic
$
0.17 $
(0.01) $
0.16
Net income per common and common equivalent shares - Diluted
$
0.16 $
(0.01) $
0.15
Comprehensive income
$
11,013 $
(906) $
10,107
106
Three Months Ended March 31, 2023
As Reported
Revision
As Revised
Net sales from products
$
219,389 $
(569) $
218,820
Net sales from services
123,654
1,867
125,521
Net sales
343,043
1,298
344,341
Cost of product sales
107,584
673
108,257
Cost of service sales
31,357
263
31,620
Cost of sales
138,941
936
139,877
Gross margin
204,102
362
204,464
Sales, general and administrative
116,567
(621)
115,946
Total operating expenses
187,494
(621)
186,873
Income from operations
16,608
983
17,591
Income before provision for income taxes
41,884
983
42,867
Provision for (benefit from) income taxes
(3,255)
223
(3,032)
Net income
$
45,139 $
760 $
45,899
Net income per common and common equivalent shares - Basic
$
0.62 $
0.01 $
0.63
Net income per common and common equivalent shares - Diluted
$
0.61 $
0.01 $
0.62
Comprehensive income
$
46,999 $
760 $
47,759
107
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of Axon Enterprise, Inc.
Opinions on the Financial Statements and Internal Control over Financial Reporting
We have audited the accompanying consolidated balance sheet of Axon Enterprise, Inc. and its subsidiaries (the
"Company") as of December 31, 2024, and the related consolidated statements of operations and comprehensive income
(loss), of stockholders’ equity and of cash flows for the year then ended, including the related notes (collectively referred to
as the "consolidated financial statements"). We also have audited the Company's internal control over financial reporting as
of December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial
position of the Company as of December 31, 2024, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion,
the Company did not maintain, in all material respects, effective internal control over financial reporting as of
December 31, 2024, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO
because a material weakness in internal control over financial reporting existed as of that date as the Company did not
design and maintain effective controls related to revenue recognition for its customer contracts.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that
there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be
prevented or detected on a timely basis. The material weakness referred to above is described in Management’s Report on
Internal Control over Financial Reporting appearing under Item 9A. We considered this material weakness in determining
the nature, timing, and extent of audit tests applied in our audit of the 2024 consolidated financial statements, and our
opinion regarding the effectiveness of the Company’s internal control over financial reporting does not affect our opinion
on those consolidated financial statements.
Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal
control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting,
included in management's report referred to above. Our responsibility is to express opinions on the Company’s
consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We
are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material
misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained
in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material
misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and
disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and
significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial
statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other
procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our
opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded
108
as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated
financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to
accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially
challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit
matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Revenue Recognition for Certain Products and Services
As described in Notes 1 and 2 to the consolidated financial statements, the Company’s net sales were $2.1 billion for the
year ended December 31, 2024, a significant portion of which relates to certain products and services. The Company
derives revenue from two primary sources: the sale of physical products and subscriptions to software-as-a-service (SaaS)
offerings. To a lesser extent, the Company also recognizes revenue from training, professional services and other software
and SaaS services. Revenues are recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration the Company expects to receive in exchange for those products or services. Contracts
include various combinations of products and services, each of which is generally distinct and accounted for as a separate
performance obligation. Performance obligations to deliver products are generally satisfied at the point in time the
Company ships the product as this is when the customer obtains control of the asset. Performance obligations to provide
the SaaS offerings are generally satisfied over time as the customer receives and consumes the benefits of these services
over the stated service period. Products and services may be sold on a standalone basis or as part of a bundle of hardware
products and services together. Contracts with other cancellation provisions or optional periods may require judgment in
determining the contract term, including the existence of substantive termination penalties, determining transaction price
and identifying the performance obligations. Customers may request changes that amend, replace or cancel existing
contracts and judgment is required to determine whether these changes should be accounted for as a separate contract or a
modification to an existing contract.
The principal considerations for our determination that performing procedures relating to revenue recognition for certain
products and services is a critical audit matter are (i) the significant judgment by management in evaluating key terms and
conditions in contracts with customers that impact revenue recognition and (ii) a high degree of auditor judgment,
subjectivity, and effort in performing procedures and evaluating audit evidence related to management’s evaluation of the
key terms and conditions in contracts with customers related to contract term, cancellation provisions, substantive
termination penalties, optional periods, and if changes to contracts should be accounted for as separate or modified
contracts. As described in the “Opinions on the Financial Statements and Internal Control over Financial Reporting”
section, a material weakness was identified related to this matter.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the revenue recognition process, including controls over contract reviews to identify key terms and conditions in
contracts with customers. These procedures also included, among others, for a sample of revenue transactions from certain
products and services, (i) evaluating the reasonableness of management’s judgments in accounting for the key terms and
conditions in the contracts, including evaluating contract term, cancellation provisions, substantive termination penalties,
optional periods, and if changes to contracts should be accounted for as separate or modified contracts; (ii) testing revenue
recognized by obtaining and inspecting source documents, such as contracts, purchase orders, invoices, proof of transfer of
control, and cash receipts; and (iii) confirming a sample of outstanding customer invoice balances as of December 31, 2024
and, for confirmations not returned, obtaining and inspecting source documents, such as contracts, purchase orders,
invoices, proof of transfer of control, and subsequent cash receipts.
109
Valuation of Certain Intangible Assets - Acquisitions of Fusus and Dedrone
As described in Notes 8 and 21 to the consolidated financial statements, during 2024, the Company completed the step
acquisitions of its remaining interests in Fusus L.L.C. (“Fusus”) and Dedrone Holdings, Inc. (“Dedrone”). The incremental
consideration transferred for the Fusus acquisition was $241.3 million, and $56.6 million of developed technology was
recorded. The incremental consideration transferred for the Dedrone acquisition was $391.1 million, and $41.0 million of
developed technology and $41.0 million of in-process research and development (IPR&D) was recorded. The fair value of
the acquired Fusus developed technology was calculated using the multi-period excess earnings method, and significant
assumptions used by management were projected revenues, earnings before interest, taxes, and depreciation and
amortization (EBITDA) margins, obsolescence technology factor, and the discount rate. The fair value of the acquired
Dedrone developed technology and IPR&D were calculated using the cost approach, and the significant assumption used
by management was direct development cost build-up.
The principal considerations for our determination that performing procedures relating to the valuation of certain intangible
assets acquired in the acquisitions of Fusus and Dedrone is a critical audit matter are (i) the significant judgment by
management when developing the fair value estimates of the Fusus developed technology and the Dedrone developed
technology and IPR&D intangible assets acquired; (ii) a high degree of auditor judgment, subjectivity, and effort in
performing procedures and evaluating management’s significant assumptions related to the projected revenues, EBITDA
margins, obsolescence technology factor, and discount rate for the Fusus developed technology intangible asset acquired
and the direct development cost build-up for the Dedrone development technology and IPR&D intangible assets acquired;
and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our
overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls
relating to the acquisition accounting, including controls over management’s valuation of the Fusus developed technology
and the Dedrone developed technology and IPR&D intangible assets acquired. These procedures also included, among
others (i) reading the purchase agreements; (ii) testing management’s process for developing the fair value estimates of the
Fusus developed technology and the Dedrone developed technology and IPR&D intangible assets acquired; (iii) evaluating
the appropriateness of the multi-period excess earnings method used by management for the Fusus developed technology
and the cost approach used by management for the Dedrone developed technology and IPR&D; (iv) testing the
completeness and accuracy of underlying data used by management in the valuation approaches; (v) and evaluating the
reasonableness of significant assumptions used by management related to the projected revenues, EBITDA margins,
obsolescence technology factor, and discount rate related to the Fusus developed technology and the direct development
cost build-up related to the Dedrone developed technology and IPR&D intangible assets acquired. Evaluating the
reasonableness of management’s significant assumptions related to the projected revenues and EBITDA margins for the
Fusus developed technology and the direct development cost build-up related to the Dedrone developed technology and
IPR&D involved considering (i) the past performance of the acquired businesses, (ii) the consistency with external market
and industry data, and (iii) whether the assumptions were consistent with evidence obtained in other areas of the audit.
Evaluating the reasonableness of management’s significant assumption related to obsolescence technology factor for the
Fusus developed technology involved considering (i) the consistency with external market data, and (ii) whether the
assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and
knowledge were used to assist in the (i) evaluation of the appropriateness of the multi-period excess earnings method and
reasonableness of the obsolescence technology factor and discount rate assumptions used in the valuation of the Fusus
developed technology intangible asset acquired and (ii) evaluation of the appropriateness of the cost approach used in the
valuation of the Dedrone developed technology and IPR&D intangible assets acquired.
/s/ PricewaterhouseCoopers LLP
Phoenix, Arizona
February 28, 2025
We have served as the Company’s auditor since 2024.
110
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Axon Enterprise, Inc.
Opinion on the financial statements
We have audited the accompanying consolidated balance sheets of Axon Enterprise, Inc. (a Delaware corporation) and
subsidiaries (the “Company”) as of December 31, 2023, the related consolidated statements of operations and
comprehensive income (loss), stockholders’ equity, and cash flows for each of the two years in the period ended December
31, 2023, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023, and the
results of its operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity
with accounting principles generally accepted in the United States of America.
Basis for opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion
on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB
and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the
applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement,
whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the
financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as
evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our
opinion.
/s/ GRANT THORNTON LLP
We served as the Company’s auditor from 2005 to 2024
Phoenix, Arizona
February 27, 2024 (except for Note 20, Note 23 and Note 24, as to which the date is February 28, 2025)
111
Item 9.
Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
None.
Item 9A. Controls and Procedures
Attached as exhibits to this Form 10-K are certifications of the Chief Executive Officer (as the principal executive
officer) and Chief Financial Officer (as the principal financial and accounting officer), which are required in accordance
with Rule 13a-14 of the Exchange Act. This section includes information concerning the controls and controls evaluation
referred to in the certifications. This section should be read in conjunction with the certifications and the
PricewaterhouseCoopers LLP audit report for a more complete understanding of the topics presented.
PricewaterhouseCoopers LLP has independently assessed the effectiveness of our internal control over financial reporting
as of December 31, 2024 and its report is included in Item 8 of this Form 10-K.
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 December
31, 2024, the end of the period covered by this Annual Report on Form 10-K. 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, as
amended, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms,
and that such information is 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 this
evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and
procedures were not effective as of December 31, 2024, as a result of the material weakness in internal control over
financial reporting discussed below.
Notwithstanding the material weakness, and based on the additional analyses and other procedures management
performed to ensure that its consolidated financial statements included in this Annual Report were prepared in accordance
with U.S. GAAP, we have concluded that the consolidated financial statements and other financial information included in
this Form 10-K fairly present in all material respects our financial condition, results of operations, and cash flows for the
periods presented in conformity with accounting principles generally accepted in the U.S.
Management's Report on Internal Control over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act). Management has assessed the effectiveness of our
internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control -
Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO). Based on this evaluation, management concluded that the Company's internal control over financial reporting
was not effective as of December 31, 2024 as a result of the material weakness described below.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not
be prevented or detected on a timely basis. The Company did not design and maintain effective controls related to revenue
recognition for its customer contracts. Specifically, the Company did not design and maintain controls to update its revenue
recognition policies to reflect changes in product offerings or terms and conditions of arrangements with customers to
ensure revenue was appropriately recognized and disclosed in accordance with U.S. GAAP. This material weakness
resulted in immaterial errors related to revenue, related contract assets and liabilities, and the remaining performance
obligations disclosure as of and for each of the interim and annual periods during 2022, 2023 and 2024. Additionally, the
material weakness could result in a misstatement of the aforementioned accounts and disclosure that would result in a
material misstatement to the annual or interim consolidated financial statements that would not be prevented or detected.
Our independent registered public accounting firm, PricewaterhouseCoopers LLP, has audited the effectiveness of the
Company’s internal control over financial reporting as of December 31, 2024 as stated in their report which appears in Item
8 of this Form 10-K.
112
Remediation Plan
We are committed to maintaining strong internal control over financial reporting. In relation to the material weakness,
management, with oversight from the Company’s Audit Committee, is in the process of developing and implementing
remediation plans in response to the identified material weakness described above. Specifically, the Company is in the
process of 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. Additionally, the Company is designing and implementing additional
monitoring controls for its existing and new revenue streams. This material weakness will not be considered remediated
until the applicable controls operate for a sufficient period of time for management to conclude, through testing, that such
controls are operating effectively. Management is committed to the remediation of the material weakness described above,
as well as the continued improvement of our internal controls and will continue to review, optimize and enhance financial
reporting controls and procedures.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting (as such term is defined in Rules
13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2024, that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.
113
Item 9B. Other Information
Rule 10b5-1 Director and Officer Trading Arrangements
The table below describes the contracts, instructions or written plans for the purchase or sale of securities adopted or
terminated by our directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) during the three months ended
December 31, 2024, that are intended to satisfy the affirmative defense conditions of Rule 10b5-1(c).
Name and Title
Action
Date of Adoption or
Termination
Expiration Date
Aggregate
Number of
Securities to
be Sold
Patrick W. Smith,
Chief Executive Officer
Termination(1)
December 12, 2024
December 31, 2025
789,071
Jeri Williams,
Director
Adoption
December 10, 2024
December 31, 2025
964
Patrick W. Smith,
Chief Executive Officer
Adoption
December 15, 2024
October 20, 2028
150,000
(1)
Trading arrangement was originally adopted on May 24, 2024
No other Rule 10b5-1 trading arrangements or “non-Rule 10b5-1 trading arrangements” (as defined by Item 408(c) of
Regulation S-K) were entered into, modified or terminated by our directors or officers during such period.
Appointment of Principal Accounting Officer
We are providing the following disclosure in lieu of filing a Current Report on Form 8-K relating to Item 5.02
(Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory
Arrangements of Certain Officers).
On February 27, 2025, the Board of Directors approved the appointment of Jennifer Mak, the Company’s Chief
Accounting Officer, to serve as the Company’s principal accounting officer effective as of April 1, 2025. Brittany Bagley,
Chief Operating Officer and Chief Financial Officer, currently serves as both the Company’s principal financial officer and
principal accounting officer, will continue to serve as the Company’s principal accounting officer through March 31, 2025
and will continue to serve as the Company’s principal financial officer on an ongoing basis.
Ms. Mak, age 50, joined the Company on September 25, 2023 and has served as the Chief Accounting Officer since
that time. Previously, Ms. Mak served at MSCI Inc., as Global Controller and Head of Finance Operations from July 2018
through September 2023. Prior to that, Ms. Mak served at Honeywell International Inc. (“Honeywell”), as Vice President
and Controller from April 2016 to June 2018, and as Controller of the Performance Materials and Technologies segment
from April 2014 to April 2016. She joined Honeywell in 2010 and served as Assistant Controller of Honeywell from 2011.
Ms. Mak earned her Bachelor of Science degree in Accountancy from the University of Illinois at Urbana-Champaign, IL.
Ms. Mak received total cash compensation of $402,195 in her position at the Company from January 1, 2025 through
February 28, 2025 consisting of base salary and annual bonus award under the Company’s annual cash incentive plan. Ms.
Mak received the following compensation and benefits in her position at the Company in 2024: (a) total cash compensation
of $579,306 inclusive of base salary, an annual bonus award under the Company’s annual cash incentive plan, and
reimbursement of certain expenses, (b) 3,532 shares of RSUs, subject to continued service through each vesting date, and
(c) 27,344 shares of PSUs as part of our 2024 Employee eXponential Stock Plan.
In connection with her appointment as the Company’s principal accounting officer, Ms. Mak will continue receiving
a base salary, and be eligible to participate in the Company’s annual incentive compensation plans and long-term incentive
plans and receive restricted stock unit awards under the Company’s 2024 Employee eXponential Stock Plan and the
Company’s Amended and Restated 2022 Stock Incentive Plan, at levels commensurate with other similarly situated
persons at the Company.
114
Other than such compensation arrangements, Ms. Mak has no interest in any transactions that would require
disclosure pursuant to Item 404(a) of Regulation S-K. The selection of Ms. Mak to serve as the Company’s principal
accounting officer was not made pursuant to any arrangement or understanding with respect to any other person. There are
no family relationships, as defined in Item 401 of Regulation S-K, between Ms. Mak and any of the Company’s directors
or executive officers.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
None.
PART III
Item 10. Directors, Executive Officers and Corporate Governance
The information required to be disclosed by this item is incorporated herein by reference to our definitive proxy
statement for the 2025 Annual Meeting of Shareholders (the “2025 Proxy Statement”), which we expect to file with the
SEC within 120 days after the end of our fiscal year ended December 31, 2024.
We have adopted insider trading policies and procedures governing the purchase, sale, and other dispositions of
securities of Axon by the Company, directors, officers, and employees that we believe are reasonably designed to promote
compliance with insider trading laws, rules and regulations. Our insider trading policy states, among other things, that the
Company and our directors, officers, and employees are prohibited from trading in such securities while in possession of
material, nonpublic information. The foregoing summary of our insider trading policies and procedures does not purport to
be complete and is qualified by reference to our Insider Trading Policy filed as an exhibit to this Annual Report on Form
10-K.
Item 11. Executive Compensation
The information required to be disclosed by this item is incorporated herein by reference to our 2025 Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
A description of our equity compensation plans approved by our shareholders is included in Note 16 in Part II, Item 8
of this Annual Report on Form 10-K. The following table provides details of our equity compensation plans at
December 31, 2024:
Plan Category
Number of
Securities to be
Issued upon
Exercise of Outstanding
Options, Warrants and Rights
(a)
Weighted
Average
Exercise Price
of Outstanding Options,
Warrants and Rights
(b) (1)
Number of Securities
Remaining Available for
Future Issuance Under Equity
Compensation Plans (Excluding
Securities
Reflected
in Column (a)) (c)
Equity compensation plans approved
by security holders
6,533,598
$
28.58
3,201,463
Equity compensation plans not
approved by security holders(2)
35,843
—
112,505
Total
6,569,441
3,313,968
________________________________________________________
(1)
The weighted average exercise price is calculated based solely on the exercise prices of the outstanding stock options
and does not reflect the shares that will be issued upon the vesting of outstanding awards of RSUs that have no
exercise price.
(2)
In September 2022, our Board of Directors adopted the Axon Enterprise, Inc. 2022 Stock Inducement Plan (the “2022
Inducement Plan”) pursuant to which we reserved 250,000 shares of common stock for issuance under the 2022
Inducement Plan. In September 2019, our Board of Directors adopted the Axon Enterprise, Inc. 2019 Stock
Inducement Plan (the “2019 Inducement Plan” and, together with the 2022 Inducement Plan, the “Inducement Plans”)
115
pursuant to which we reserved 500,000 shares of common stock for issuance under the 2019 Inducement Plan. The
Inducement Plans were adopted without shareholder approval pursuant to Rule 5635(c)(4) and Rule 5635(c)(3) of the
Nasdaq Listing Rules. Each Inducement Plan provides for the grant of equity-based awards, including restricted
stock, RSUs, performance shares and PSUs, and its terms are substantially similar to our shareholder-approved 2022
Plan and 2019 Plan, respectively. In accordance with Rule 5635(c)(4) and Rule 5635(c)(3) of the Nasdaq Listing
Rules, awards under each Inducement Plan may only be made to individuals not previously employees or non-
employee directors of the Company (or following such individuals’ bona fide period of non-employment with the
Company), as an inducement material to the individuals’ entry into employment with the Company.
All other information required to be disclosed by this item is incorporated herein by reference to our 2025 Proxy
Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required to be disclosed by this item is incorporated herein by reference to our 2025 Proxy
Statement.
Item 14. Principal Accountant Fees and Services
The information required to be disclosed by this item is incorporated herein by reference to our 2025 Proxy
Statement.
PART IV
Item 15. Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this report:
1.
Consolidated financial statements: All consolidated financial statements as set forth under Part II, Item 8 of this
report.
2.
Supplementary Financial Statement Schedules: Supplementary schedules have not been included because they are
not applicable or because the information is included elsewhere in the consolidated financial statements or notes
thereto.
3.
Exhibits:
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
Form of Common Stock Certificate (incorporated by reference to Exhibit 4.2 to Registration Statement on
Form SB-2, effective May 11, 2001 (Registration No. 333-55658))
4.2
Description of Securities of Axon Enterprise, Inc. registered under Section 12 of the Exchange Act
(incorporated by reference to Exhibit 4.2 to the Annual Report on Form 10-K, filed February 27, 2024)
4.3
Indenture, dated as of December 9, 2022, 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 December 9, 2022)
4.4
Form of 0.50% Convertible Senior Note due 2027 (incorporated by reference to Exhibit A in Exhibit 4.1 to
the Current Report on Form 8-K, filed December 9, 2022)
10.1+
Form of Indemnification Agreement between the Company and its directors (incorporated by reference to
Exhibit 10.4 to Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658))
10.2+
Form of Indemnification Agreement between the Company and its officers (incorporated by reference to
Exhibit 10.5 to Registration Statement on Form SB-2, effective May 11, 2001 (Registration No. 333-55658))
10.3+
TASER International, Inc. Deferred Compensation Plan (incorporated by reference to Exhibit 10.1 to Form
8-K, filed on July 12, 2013)
Exhibit
Number
Description
116
10.4+
CEO Performance Award (incorporated by reference to Annex A of the Company’s Proxy Statement, filed
on April 13, 2018)
10.5+
Axon Enterprise, Inc. 2019 Stock Incentive Plan (incorporated by reference to Annex A of the Company’s
Proxy Statement, filed on December 31, 2018)
10.6+
Axon Enterprise, Inc. 2019 Stock Incentive Plan Exponential Stock Unit Grant Notice (incorporated by
reference to Annex B of the Company’s Proxy Statement, filed on December 31, 2018)
10.7+
Executive Employment Agreement by and between Axon Enterprise, Inc. and Joshua M. Isner (incorporated
by reference to Exhibit 10.3 to the Current Report on Form 8-K, filed June 4, 2019)
10.8+
Executive Employment Agreement by and between Axon Enterprise, Inc. and Jeffrey C. Kunins, dated
September 23, 2019 (incorporated by reference to Exhibit 10.16 to the Annual Report on Form 10-K, filed
February 28, 2020)
10.9+
Axon Enterprise, Inc. 2019 Stock Inducement Plan (incorporated by reference to Exhibit 99.1 to the
registration statement on Form S-8, filed September 23, 2019)
10.10+
Auction Statement from the Company to the Arizona State Land Department (incorporated by reference to
Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed November 6, 2020)
10.11±
Construction Management Agreement, dated February 23, 2022, by and between Axon Enterprise, Inc. and
Okland Construction Company, Inc. (incorporated by reference to Exhibit 10.19 to the Annual Report on
Form 10-K, filed February 24, 2022)
10.12+
Axon Enterprise, Inc. 2022 Stock Incentive Plan (incorporated by reference to Annex B of the Company’s
Proxy Statement, filed April 8, 2022)
10.13+
Axon Enterprise, Inc. 2022 Stock Inducement Plan (incorporated by reference to Exhibit 99.1 to the
registration statement on Form S-8, filed September 23, 2022)
10.14+
Executive Employment Agreement by and between Axon Enterprise, Inc. and Brittany Bagley (incorporated
by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q, filed November 9, 2022)
10.15
Form of Convertible Note Hedge Confirmation (incorporated by reference to Exhibit 10.1 to the Current
Report on Form 8-K, filed December 9, 2022)
10.16
Form of Warrant Confirmation (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-
K, filed December 9, 2022)
10.17
Credit Agreement, dated December 15, 2022, by and between Axon Enterprise, Inc. and JPMorgan Chase
Bank, N.A. (incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K, filed February
28, 2023)
10.18+
Employment Agreement, dated December 8, 2023, by and between Axon Enterprise, Inc. and Patrick W.
Smith (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K, filed December 14,
2023)
10.19+
Letter Agreement, dated December 8, 2023, by and between Axon Enterprise, Inc. and Patrick W. Smith
(incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K, filed December 14, 2023)
10.20+
Axon Enterprise, Inc. Amended and Restated 2022 Stock Incentive Plan, effective as of May 10, 2024
(incorporated by reference to the Definitive Proxy Statement, filed on March 29, 2024).
10.21+
Axon Enterprise, Inc. eXponential Stock Plan, effective as of May 10, 2024 (incorporated by reference to the
Definitive Proxy Statement, filed on March 29, 2024).
10.22+
2024 CEO Performance Award, effective as of December 22, 2023 (incorporated by reference to the
Definitive Proxy Statement, filed on March 29, 2024).
10.23
Distribution Agreement, dated May, 2024, by and between Axon Enterprise, Inc. and J.P. Morgan Securities
LLC. (incorporated by reference to Exhibit 1.1 to the Current Report on Form 8-K, filed May 13, 2024)
19.1*
Axon Enterprise, Inc. Insider Trading Policy
21.1*
List of Subsidiaries
23.1*
Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm
23.2*
Consent of Grant Thornton, LLP, independent registered public accounting firm
24.1*
Powers of attorney (see signature page)
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)
Exhibit
Number
Description
117
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
97
Axon Enterprise, Inc. Incentive Compensation Recovery Policy (incorporated by reference to Exhibit 97 to
the Annual Report on Form 10-K, filed February 27, 2024)
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 Calculation Linkbase Document
101.LAB*
Inline XBRL Taxonomy Label Linkbase Document
101.PRE*
Inline XBRL Taxonomy Presentation Linkbase Document
104
The cover page from the Company’s Annual Report for the year ended December 31, 2024, formatted in
Inline XBRL
Exhibit
Number
Description
+
Management contract or compensatory plan or arrangement
*
Filed herewith
**
Furnished herewith
±
Certain confidential portions of this Exhibit were omitted by means of marking such portions with brackets (“[***]”)
because the identified confidential portions (i) are not material and (ii) would be competitively harmful if publicly
disclosed.
Item 16. Form 10-K Summary
Not applicable.
118
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 28, 2025
By:
/s/ PATRICK W. SMITH
Chief Executive Officer, Director
(Principal Executive Officer)
Date: February 28, 2025
By:
/s/ BRITTANY BAGLEY
Chief Operating Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
119
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Patrick W. Smith his or her true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K, and to
file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or his substitute or substitutes, may do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following
persons on behalf of the registrant and in the capacities and on the dates indicated.
Signature
Title
Date
/s/ PATRICK W. SMITH
Chief Executive Officer, Director
(Principal Executive Officer)
February 28, 2025
Patrick W. Smith
/s/ BRITTANY BAGLEY
Chief Operating Officer and Chief Financial Officer
(Principal Financial and Accounting Officer)
February 28, 2025
Brittany Bagley
/s/ ERIKA AYERS BADAN
Director
February 28, 2025
Erika Ayers Badan
/s/ ADRIANE M. BROWN
Director
February 28, 2025
Adriane M. Brown
/s/ JULIE A. CULLIVAN
Director
February 28, 2025
Julie A. Cullivan
/s/ MICHAEL GARNREITER
Director
February 28, 2025
Michael Garnreiter
/s/ CAITLIN E. KALINOWSKI
Director
February 28, 2025
Caitlin E. Kalinowski
/s/ MATTHEW R. MCBRADY
Director
February 28, 2025
Matthew R. McBrady
/s/ HADI PARTOVI
Director
February 28, 2025
Hadi Partovi
/s/ GRAHAM SMITH
Director
February 28, 2025
Graham Smith
/s/ JERI WILLIAMS
Director
February 28, 2025
Jeri Williams
120
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AXON.COM