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(480) 991-0797

(Registrant’s telephone number, including area code)

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

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

______________________________________________________

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

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

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

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

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

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

Item 1. Financial Statements

(in thousands, except per share data)

(unaudited)

(unaudited)

(unaudited)

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

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

These unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP” or “GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these unaudited consolidated financial statements are consistent with those followed in our annual consolidated financial statements for the year ended December 31, 2024, as filed on our amended 2024 Annual Report on Form 10-K/A. In the opinion of management, these unaudited consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with the financial statements included in our amended 2024 Annual Report on Form 10-K/A for the year ended December 31, 2024. Certain amounts in prior periods’ consolidated financial statements have been reclassified to conform to current period presentation. Our results of operations for the three months ended March 31, 2025 are not necessarily indicative of the results to be expected for the full year (or any other period). Significant estimates and assumptions in these unaudited 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 unaudited consolidated financial statements are reasonable; however, actual results could differ materially from those estimates.

As discussed in the financial statements as of and for the year ended December 31, 2024 included in our amended 2024 Annual Report on Form 10-K/A, we identified an error in our previously issued financial statements related to the balance sheet presentation of the $690.0 million aggregate principal amount of 0.50% convertible senior notes due 2027 (the “2027 Notes” or “Notes”) issued pursuant to an indenture, dated December 9, 2022 (the “Indenture”), between current liabilities and long-term liabilities. The identified error impacted the financial statements previously issued in the Annual Report on Form 10-K for the year ended December 31, 2024, and in the Quarterly Reports on Form 10-Q for the quarterly periods ended March 31, 2024 and September 30, 2024.

Additionally, as discussed in the financial statements as of and for the year ended December 31, 2024 included in our amended 2024 Annual Report on Form 10-K/A, in preparing the 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 Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”).

The identified errors impacted the financial statements as of and for the three months ended March 31, 2024, among other periods as previously disclosed.

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 Topic 250, Accounting Changes and Error Corrections. Based on this assessment, we concluded that the errors, in the aggregate, are material to the March 31, 2024 financial statements and therefore, we are restating those financial statements herein. Furthermore, we made adjustments to correct for other previously identified immaterial errors. The Company has also restated impacted amounts within the accompanying footnotes to the Consolidated Financial Statements. See Note 18 for further information about the restatement.

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 three depository institutions. As of March 31, 2025, the aggregate balances in such accounts were $879.3 million. Our balances with these three 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.

For the three months ended March 31, 2025 and 2024, no customer represented more than 10% of total net sales. At March 31, 2025 and December 31, 2024, 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, Germany and the Republic of Korea, among others. 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.

In the three months ended March 31, 2025, we approved a plan to realign our business to better reflect our continued growth and expansion of our product offerings and our software and services offerings (the “Segment Realignment”). Previously reported within two reportable segments, TASER and Software and Sensors, we prospectively realigned our business in a manner that provides increased transparency and distinction between our hardware and software and services components. As a result of the Segment Realignment and effective as of the three months ended March 31, 2025, our financial results are reported in two reportable segments, Connected Devices and Software & Services. “Connected Devices” includes the development, manufacture and sale of fully integrated hardware solutions such as conducted energy devices (“CEDs”), body cameras, drones, accessories, extended warranties and other hardware products. “Software & Services” includes the development and sale of fully integrated cloud-based software solutions such as Axon Evidence, Records Management System, Draft One and other software and services that enable law enforcement to securely store, manage, share and analyze video and manage operations. As a result of the Segment Realignment, we have recast our segment and other relevant disclosures for the three months ended March 31, 2024 to conform to the new presentation.

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 segment to evaluate segment profitability, identify cost trends and make operational decisions to support our segments. Accordingly, the segment measure of profit and loss used by the CODM is 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. For additional details, refer to Note 16.

In addition, the CODM reviews consolidated financials and revenue by major geography and product and service lines. 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, and 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 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 three months ended March 31, 2025 and 2024, no individual country outside the United States represented more than 10% of total net sales. Substantially all of our assets are located in the United States. For additional details, refer to Note 2.

The 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.

Restricted cash balances were $11.8 million and $11.9 million as of March 31, 2025 and December 31, 2024, respectively. This balance is primarily attributable to a $9.7 million 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 March 31, 2025, approximately $11.7 million was included in prepaid expenses and other current assets on our consolidated balance sheet, with the remainder in other long-term assets.

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

Our debt arrangements principally include the Senior Notes (as defined below) and the 2027 Notes as discussed in further detail in Note 10, as well as our revolving credit facility as discussed in further detail in Note 13. The Senior Notes and 2027 Notes are recorded at par value less debt issuance costs, which are recorded as a direct deduction from the carrying amount of the outstanding debt. Debt issuance costs related to the Senior Notes and the 2027 Notes are amortized to interest expense, using the effective interest method. Debt arrangements containing provisions that provide the holders with a right to demand cash payment of the outstanding principal within 1 year of the balance sheet date are classified as current liabilities unless the Company has both the intent and ability to refinance such short-term obligations on a long-term basis.

In the event debt is modified and the new debt terms are substantially different from the original debt terms, the original debt is accounted for as being extinguished and a new debt instrument is recognized. If the new debt terms are not substantially different from the original debt terms, the transaction is accounted for as a modification of the original debt terms. In the event of an induced conversion, we recognize an inducement expense, calculated as of the date the inducement offer is accepted, representing the excess of the equity consideration transferred in the transaction over the fair value of securities and other consideration issuable pursuant to the original conversion terms defined in the indenture governing the relevant convertible notes.

When third-party transaction costs are incurred as part of such induced conversion transactions, they are expensed as a cost of inducement and presented as part of other income, net in our consolidated statement of operations. Any unamortized debt issuance costs directly related to convertible notes repurchased as part of such induced conversion transactions are recorded as a reduction to additional paid-in-capital on our consolidated balance sheet, as part of the derecognition of the associated net carrying amount of the portion of the convertible notes repurchased. Refer to Note 10 for additional details.

Borrowings under our revolving credit facility, if any, are recognized at principal balance plus accrued interest based upon stated interest rates. Debt issuance costs associated with our revolving credit facility are presented as part of other current assets, for the portion of total deferred costs to be amortized over the 12 months following the balance sheet date, and as part of other long-term assets, for the remaining portion of total deferred costs, in our consolidated balance sheets. Debt issuance costs related to our revolving credit facility are amortized to interest expense over the term of the revolving credit facility under the straight-line method. Refer to Note 13 for additional details.

The carrying value of goodwill is tested for impairment at least annually or sooner whenever events or changes in circumstances indicate that the assets may be impaired. Goodwill is tested for impairment at a reporting unit level, which is the same as our operating segments. The Segment Realignment resulted in changes to the composition of our reporting units and as a result, goodwill was allocated to each reporting unit using a relative fair value approach. We determined the fair value of our reporting units using a discounted cash flow analysis and a market approach with comparable company information such as revenue multiples. Determining the fair value of a reporting unit involves judgment and the use of significant estimates and assumptions, which include projected sales, discount rates, and a variety of other factors. Changes in reporting unit earnings, expected future cash flows, and comparable company information, as well as underlying market and overall economic conditions, among others, make these estimates subject to uncertainty.

Our most recent annual impairment assessment in the fourth quarter of 2024 determined that our goodwill was not impaired as the estimated fair values exceeded the carrying values for each of our reporting units. Furthermore, considering the Segment Realignment in the first quarter of 2025, there is likewise no goodwill impairment through March 31, 2025. Refer to Note 6 for additional details regarding the reallocation of goodwill due to the Segment Realignment.

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 the early repurchase of a portion of the 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 computation of diluted net income per share in periods in which the effect would be antidilutive. For additional information regarding our 2027 Notes and 2027 Warrants, refer to Note 10.

The calculation of the weighted average number of shares outstanding and earnings per share is as follows (in thousands except per share data):

(1)The impact of the early repurchase of a portion of the 2027 Notes is weighted based upon the number of days in each corresponding period of time for (a) the period between January 1, 2025 and the closing date of the repurchase, which includes the total amount of shares issuable upon a conversion of all of the 2027 Notes; and (b) subsequent to the closing date of the repurchase through March 31, 2025, which includes the amount of shares issuable upon a conversion of the 2027 Notes that remain outstanding after the early repurchase. Refer to Note 10 for additional details.

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):

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“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 ASU on our consolidated financial statements and expect to adopt for the year ending December 31, 2025.

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 the 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 certain transactions should be accounted for as an induced conversion or debt extinguishment. 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 elected to early adopt ASU 2024-04 in March 2025 and applied the amendment when assessing the accounting treatment for our convertible debt repurchase. For additional details, refer to Note 10.

The following tables present our revenues by primary product and service offering and reportable segment (in thousands). All periods presented reflect the impact of the Segment Realignment discussed in Note 1.

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

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

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

The following table presents our contract assets and contract liabilities as of and for the three months ended March 31, 2025 and year ended December 31, 2024 (in thousands):

During the three months ended March 31, 2025 and 2024, revenue recognized from the respective beginning contract liabilities was $272.2 million and $182.5 million, respectively.

As of March 31, 2025, we had approximately $7.7 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 March 31, 2025. 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.

The following tables summarize our cash, cash equivalents, marketable securities and available-for-sale debt investments at March 31, 2025 and December 31, 2024 (in thousands):

As of March 31, 2025, we had $515.4 million of available-for-sale debt 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 statements of operations as unrealized gain (or loss) on marketable securities, which is included in other income, net. During the three months ended March 31, 2025, we recorded an unrealized loss on marketable securities of $23.4 million. We recorded an unrealized gain on marketable securities of $21.8 million for the same period in the prior year.

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.

Accounts and notes receivable and contract assets are presented net of a reserve for expected credit losses. The following table provides a roll-forward of the allowance for expected credit losses. The expected credit losses for receivables are 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):

As of March 31, 2025 and December 31, 2024, the allowance for expected credit losses for each type of customer receivable were as follows (in thousands):

Inventory consisted of the following at March 31, 2025 and December 31, 2024 (in thousands):

The changes in the carrying amount of goodwill for the three months ended March 31, 2025 were as follows (in thousands):

(1)Due to the Segment Realignment, the beginning goodwill balances have been recast to conform to the new segment presentation. Refer to Note 1 for additional details.

Intangible assets (other than goodwill) consisted of the following at March 31, 2025 and December 31, 2024 (in thousands):

(1)     Consists of in-process research and development costs pertaining to the acquisition of Dedrone. During the three months ended March 31, 2025, approximately $15.3 million has been placed into service.

Amortization expense of intangible assets for the three months ended March 31, 2025 and March 31, 2024 was $6.6 million and $3.0 million, respectively. Estimated amortization for intangible assets with definite lives for the remaining nine months of 2025, the next five years ended December 31, and thereafter, is as follows (in thousands):

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, net in the consolidated statements 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.

During the quarter ended March 31, 2025, we closed a series of transactions to acquire additional equity interests in an existing strategic investee for an aggregate amount of $203.4 million.

During the quarter ended March 31, 2025, we also recognized a gain of $167.4 million related to an observable price change of a separate existing strategic investee. We also entered into a series of transactions to sell certain interests for cash consideration of $340.7 million in the same strategic investee. A majority of the sales closed during the quarter ended March 31, 2025, resulting in the Company receiving $290.9 million in cash consideration and realizing previously unrealized gains of $273.5 million, net of $1.3 million of transaction costs. The remaining sale closed in April 2025 for cash consideration of $49.8 million.

The following table presents the carrying value of our strategic investments (in thousands) as of:

The life to date cumulative upward and downward adjustments to the carrying value of our strategic equity investments accounted for under the ASC 321 measurement alternative and still held as of March 31, 2025 were $68.3 million and $25.0 million, respectively.

The following tables summarizes the gains and losses associated with our strategic investments during the period (in thousands):

(1) Includes unrealized gain of $0.8 million for the entire hybrid debt security strategic investment instrument

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 March 31, 2025 and December 31, 2024, the unconsolidated non-public VIEs in which we hold variable interests were as follows (in thousands):

(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 public safety 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.

Accrued liabilities consisted of the following at March 31, 2025 and December 31, 2024 (in thousands):

Notes payable, net, consisted of the following (in thousands):