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AXON ENTERPRISE, INC. (AXON)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered record revenue of $575.1M, up 34% YoY; non-GAAP EPS was $2.08 and GAAP diluted EPS $1.67, with adjusted EBITDA margin 24.6% and net income margin 23.5% .
  • Axon exceeded Q3 guidance (Q4 revenue guide $560–$570M; adjusted EBITDA $130–$135M) and initiated robust FY2025 guidance: revenue $2.55–$2.65B (~25% growth) and adjusted EBITDA $640–$670M (~25% margin) .
  • Strength was broad-based: Axon Cloud & Services grew 41% YoY to $230.3M; TASER revenue rose 37% YoY to $221.2M; ARR reached $1.0B (+37% YoY) and future contracted bookings climbed to $10.1B (+42% YoY) .
  • Stock reaction catalysts: beat vs company guidance, strong ARR/DFR/AI momentum, and FY2025 guide; potential offset from disclosed material weakness in revenue recognition controls and an out-of-period adjustment reducing revenue by $3.3M and net income by $2.3M .

What Went Well and What Went Wrong

  • What Went Well

    • “We closed 2024 with record quarterly revenue of $575 million in Q4, up 34% year over year” and 12th consecutive quarter of 25%+ growth .
    • Cloud momentum: Axon Cloud & Services revenue grew 41% YoY to $230.3M; adjusted gross margin rose to 77.2% (+150 bps YoY) driven by higher software mix .
    • Management confidence and customer ROI: “AI Era Plan…closing deals within 8–9 weeks of launch” and Draft One saves significant officer time; large enterprise win booked in Q4 .

  • What Went Wrong

    • Gross margin declined 120 bps YoY to 60.1% due to increased stock-based comp and amortization; Sensors & Other gross margin fell to 32.8% (–1410 bps YoY) amid product mix and legacy inventory reserve charges .
    • Internal controls: material weakness in revenue recognition controls disclosed; out-of-period adjustment reduced Q4 revenue by $3.3M and net income by $2.3M .
    • Net cash position fell sequentially to ~$110M on Dedrone acquisition closing, reducing net cash by $209M QoQ .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$430.4 $544.3 $575.1
GAAP Diluted EPS ($)$0.75 $0.86 $1.67
Non-GAAP Diluted EPS ($)$1.13 $1.45 $2.08
Gross Margin (%)61.3% 60.8% 60.1%
Adjusted Gross Margin (%)62.0% 63.2% 63.2%
Adjusted EBITDA Margin (%)21.1% 26.7% 24.6%
Net Income Margin (%)13.3% 12.3% 23.5%

Segment and product mix

Segment/CategoryQ4 2023 ($M)Q3 2024 ($M)Q4 2024 ($M)
Axon Cloud & Services Revenue$163.8 $202.5 $230.3
Axon Cloud & Services Gross Margin (%)74.7% 72.3% 73.7%
Axon Cloud & Services Adjusted GM (%)75.7% 75.2% 77.2%
Sensors & Other Revenue$105.2 $120.0 $123.6
Sensors & Other Gross Margin (%)46.9% 41.4% 32.8%
Sensors & Other Adjusted GM (%)47.5% 43.3% 36.2%
TASER Revenue$161.3 $221.7 $221.2
TASER Gross Margin (%)57.1% 60.8% 61.3%
TASER Adjusted GM (%)57.6% 63.0% 63.7%

KPIs

KPIQ4 2023Q3 2024Q4 2024
Annual Recurring Revenue ($M)$732 $885 $1,001
Net Revenue Retention (%)122% 123% 123%
Future Contracted Bookings ($B)$7.1 $8.2 $10.1
Remaining Performance Obligations ($B)——$7.9

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueQ4 2024$560–$570M $575.1M (actual) Above guidance
Adjusted EBITDAQ4 2024$130–$135M $141.6M (actual) Above guidance
RevenueFY 2024~$2.07B $2.0825B (actual) Above guidance
Adjusted EBITDA MarginFY 2024~24.6% 25.0% Above guidance
RevenueFY 2025—$2.55–$2.65B (~25% growth) Initiated
Adjusted EBITDAFY 2025—$640–$670M (~25% margin) Initiated
Stock-Based CompensationFY 2025—$580–$630M Initiated
CapExFY 2025—$140–$180M Initiated

Earnings Call Themes & Trends

TopicQ2 2024 (Prev-2)Q3 2024 (Prev-1)Q4 2024 (Current)Trend
AI/productivity (Draft One, AI Era Plan)Draft One launched; >50% report time savings noted; productivity/AI revenue +70% YoY AI Era Plan announced; strong interest at IACP/AUSA Fastest adoption products; 10 AI Era deals closed within ~8–9 weeks; ROI drives adoption Accelerating adoption and monetization
Real-Time Ops/DFR (Fusus, Skydio, Dedrone)Expanded Skydio partnership; DFR features; pending Dedrone deal Dedrone acquisition closed; DFR leadership; FAA BVLOS waiver in Campbell, CA Drone as First Responder momentum; tipping point; drones TAM ~$20B Rapid adoption, TAM expanding
Cloud software growthAxon Cloud +47% YoY to $195M; NRR 122% Cloud +36% YoY to $203M; NRR 123% Cloud +41% YoY to $230M; NRR 123%; adj GM up Consistent strong growth and margins
TASER 10 demand/supplyTASER revenue +28% YoY; ramp continues TASER +36% YoY; strong cartridges/services TASER +37% YoY; “selling as much T10 as we can make”; capacity investment planned Demand outpacing supply; capacity expansion
International/enterpriseInternational revenue +49% YoY OSP bookings strong; enterprise momentum International bookings +40–50% seq; largest enterprise deal (global logistics) Broadening customer base
Controls/Accounting—Prior-period financial statement revision noted Material weakness in revenue recognition; out-of-period adjustment Governance remediation required

Management Commentary

  • Rick Smith on AI momentum: “These are the fastest-growing adoption products we’ve ever had…closing deals within 8 or 9 weeks of launch.”
  • Josh Isner on bookings and enterprise: “We ended the year with total future contracted bookings of over $10 billion…booked the largest deal in company history with a global logistics provider.”
  • Brittany Bagley on profitability: “We achieved a 25% adjusted EBITDA margin for the full year, a milestone we initially set for 2025.”
  • Rick Smith on drones: “We think we are…among the best positioned for helping our customers globally solve [drone threat]…we’re at a tipping point.”

Q&A Highlights

  • Federal funding exposure: Management sees “more opportunity than risk” and continued body camera expansion in federal; guidance assumes no incremental Ukraine revenue .
  • Flock Safety partnership: Exited prior terms but aiming to resume with fair data flow into Fusus; customer use-cases remain supported .
  • AI Era Plan pricing/ROI: OSP uplift justified by measurable staffing/time savings (e.g., Draft One), enabling ~20% more capacity per officer .
  • TASER 10 capacity: Demand still exceeds supply; FY2025 CapEx includes capacity investments to balance supply/demand .
  • Tariffs/supply chain: Diversified and flexible supply chain; proposed tariffs not expected to impact FY2025 guidance .

Estimates Context

  • SPGI/Capital IQ consensus EPS and revenue estimates could not be retrieved due to data access limits at this time; therefore, comparison to Wall Street consensus is unavailable.
  • Company results exceeded Axon’s own Q4 guidance ranges on both revenue ($575.1M vs $560–$570M) and adjusted EBITDA ($141.6M vs $130–$135M) .

Key Takeaways for Investors

  • Broad-based growth with record Q4 revenue and strong FY2025 guide (~25% top-line growth, ~25% adj EBITDA margin) supports durable compounding, anchored by ARR $1.0B and bookings $10.1B .
  • Mix shift to high-margin Cloud & Services (40% of revenue in Q4) continues to lift adjusted gross margins; software adj GM 77.2% underscores pricing power and scalability .
  • AI Era Plan and DFR ecosystem (Fusus, Skydio, Dedrone) show accelerating adoption and large TAM expansion, creating incremental growth vectors beyond core body cams/TASER .
  • TASER 10 remains a catalyst; near-term CapEx to expand capacity should alleviate supply constraints and sustain segment margins (adj GM 63.7%) .
  • Watch governance: remediation of material weakness in revenue recognition and the out-of-period adjustment; monitor 10-K disclosures and progress on controls .
  • Segment realignment to Connected Devices and Software & Services starting Q1 2025 may enhance transparency of mix and profitability drivers .
  • Near-term trading: positive setup from guidance beat and AI/DFR momentum; risk-balancing includes controls weakness and Sensors & Other margin pressure from product mix/reserves .