Axon (AXON) Announces Proposed Convertible Senior Notes Offering

Axon Enterprise, Inc. (NASDAQ: AXON) ("Axon") today announced that it intends to offer, subject to market and other conditions, $500 million aggregate principal amount of Convertible Senior Notes due 2027 (the "Notes") in a private offering to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Securities Act"). Axon also expects to grant to the initial purchasers of the Notes an option to purchase up to an additional $75 million aggregate principal amount of the Notes, for settlement within a 13-day period beginning on, and including, the first date on which the Notes are issued.

The Notes will be Axon's senior unsecured obligations. The Notes will mature on December 15, 2027, unless earlier converted, redeemed or repurchased.

Axon will satisfy its conversion obligations by paying cash up to the aggregate principal amount of Notes to be converted and paying or delivering, as the case may be, cash, shares of its common stock or a combination of cash and shares of its common stock, at its election, in respect of the remainder, if any, of its conversion obligation in excess of the aggregate principal amount of the Notes being converted, based on the then applicable conversion rate. The maturity date, the interest rate, the initial conversion rate and the other terms of Notes will be determined upon pricing of the offering.

Axon intends to use a portion of the net proceeds from the offering to pay the cost of certain convertible note hedge transactions described below (after such cost is partially offset by the proceeds to Axon from the sale of warrants in certain warrant transactions described below).

Axon intends to use the remaining net proceeds of the offering for general corporate purposes, which may include, among other things, providing capital to support its growth and to acquire or invest in product lines, products, services or technologies. However, Axon has no current agreements with respect to any specific acquisition and has not exercised any outstanding warrants or call options with respect to its strategic investments since September 30, 2022.

In connection with the pricing of the Notes, Axon expects to enter into convertible note hedge transactions with one or more of the initial purchasers of the Notes or their respective affiliates and/or other financial institutions (the "option counterparties"). Axon also expects to enter into warrant transactions with the option counterparties. The convertible note hedge transactions are expected generally to reduce potential dilution to Axon's common stock upon any conversion of Notes and/or offset any cash payments Axon is required to make in excess of the principal amount of converted Notes, as the case may be. However, the warrant transactions could separately have a dilutive effect on Axon's common stock to the extent that the market price per share of Axon's common stock exceeds the strike price of the warrants. If the initial purchasers exercise their option to purchase additional Notes, Axon expects to sell additional warrants to the option counterparties and expects to use a portion of the net proceeds from the sale of additional Notes, together with the proceeds from the additional warrants, to enter into additional convertible note hedge transactions with the option counterparties.

In connection with establishing their initial hedges of the convertible note hedge and warrant transactions, Axon is advised by the option counterparties or their respective affiliates that they expect to enter into various derivative transactions with respect to Axon's common stock and/or purchase shares of Axon's common stock concurrently with or shortly after the pricing of the Notes. This activity could increase (or reduce the size of any decrease in) the market price of Axon's common stock or the Notes at that time.

In addition, the option counterparties or their respective affiliates may modify their hedge positions by entering into or unwinding various derivatives with respect to Axon's common stock and/or purchasing or selling Axon's common stock or other securities of Axon in secondary market transactions following the pricing of the Notes and prior to the maturity of the Notes (and are likely to do so in connection with any conversion of the Notes or redemption or repurchase of the Notes). This activity could also cause or avoid an increase or a decrease in the market price of Axon's common stock or the Notes, which could affect the ability of noteholders to convert the Notes and, to the extent the activity occurs during any observation period related to a conversion of the Notes, it could affect the number of shares, if any, and value of the consideration that noteholders will receive upon conversion of the Notes.

As stated above, the Notes will be offered and sold only to persons reasonably believed to be qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes and any shares of Axon's common stock issuable upon conversion of the Notes have not been registered under the Securities Act, or any state securities law, and the Notes and any such shares may not be offered or sold in the United States or to any U.S. persons absent registration under, or pursuant to an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws.

This press release does not constitute an offer to sell or a solicitation of an offer to buy the Notes or any shares of Axon's common stock issuable upon conversion of the Notes, nor shall there be any offer, solicitation or sale of any Notes or any such shares of Axon's common stock issuable upon conversion of the Notes in any jurisdiction in which such offer, solicitation or sale would be unlawful.

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