Axon Enterprise (AAXN) Tops Q1 EPS by 22c; Withdraws Formal Guidance

Axon Enterprise (NASDAQ: AAXN) reported Q1 EPS of $0.40, $0.22 better than the analyst estimate of $0.18. Revenue for the quarter came in at $147 million versus the consensus estimate of $131.97 million.

GUIDANCE:

Current market trends and outlook:

The following forward-looking statements reflect Axon\'s expectations as of May 7, 2020, and are subject to substantial uncertainty due to the COVID-19 pandemic.

What we\'re seeing in the market: To date, we are seeing mixed changes to buying habits among major US city police departments — some departments are continuing to place large orders for Axon products, and communicating gratitude that we are shipping mission critical equipment. We are seeing some agencies move to standard issue on Axon devices, to reduce sharing among officers, which has boosted orders.

A small number of agency customers have delayed their body camera programs, or postponed their subscription upgrades until unspecified later dates. Thus far, the impact of these COVID-19-related order delays to our full-year projections have been more than offset by a stronger-than-expected Q1 2020, better-than-expected international TASER orders realized through May 2020, and a strengthening Federal pipeline.

Through May, Axon has been executing upon orders from countries with which Axon has not historically done business, and this widening customer base is providing new revenue opportunities. So far in 2020, Axon has received body camera and TASER orders from Latin America, Asia, Southeast Asia, and South Asia — all representing new country markets — and we are also seeing stronger-than-average order activity in the UK.

We have also been encouraged by the speed with which the federal government has provided financial support to public safety. It is still early in the federal response, and the 2020 CARES Act contains $850 million in grants to state and local law enforcement, through the Edward Byrne Memorial Justice Assistance Grant (JAG), which is already more proactive than what we saw in the global economic recession of 2008-2009, as the first JAG grant then didn\'t occur until 2009. In addition, the early phase COVID-19 stimulus packages included $150 million for federal law enforcement.

Withdrawing formal guidance: Given the number of factors outside of Axon\'s control, we are withdrawing our previously provided formal full year guidance of $100 million to $105 million in Adjusted EBITDA on revenue of $615 million to $625 million, as we closely monitor municipal budgets and their potential impact on customer procurement cycles, which could materially alter our pipeline. While municipal government budget appropriations have not been a historical challenge for Axon, the severity of the economic slowdown related to COVID-19 increases appropriations risk.

Internal estimates & visibility: At this time, our best estimate for our 2020 performance remains in line with our previously issued guidance, but there is enough uncertainty in how the current crisis will affect our customers that we don\'t feel that our internal estimates should be considered formal guidance.

Axon remains confident in its long-term, multi-year outlook, and we firmly believe we will emerge from the COVID-19 crisis even stronger. Our confidence is supported by our strong Q1 2020 performance and the state of our current pipeline, which remains robust and is more geographically diverse than ever. While our contracts are subject to appropriations risk, at this point in time, the revenue realized in Q1 2020 plus the recurring revenue under contract for the remaining three quarters gives Axon visibility into approximately 50% of the midpoint of the previously issued full-year revenue guidance range.

Axon is proud to be taking care of our customers, our employees, and our societal stakeholders. We feel confident we will one day look back at 2020 as a pivotal year where we not only rose to the challenge, but we accelerated progress and created new opportunities. More importantly, we extended a hand to help our customers and their communities when it mattered.

Signed,Rick Smith, CEOLuke Larson, PresidentJawad Ahsan, CFO

For earnings history and earnings-related data on Axon Enterprise (AAXN) click here.

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