Analysis of Reportable Segments
Axon Enterprise Inc. operates in 2 segments: TASER and Software and Sensors.
Segment Profit Margin
Axon Enterprise Inc., profit margin by reportable segment
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| TASER | 63.32% | 65.70% | 62.65% | 61.94% | 68.25% |
| Software and Sensors | 59.55% | 59.53% | 59.37% | 53.30% | 51.40% |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
The profit margins for the reportable segments exhibit distinct trajectories between 2018 and 2022, characterized by volatility in the hardware-centric segment and steady expansion in the software-driven segment.
- TASER Segment Performance
- The TASER segment began the period with a peak profit margin of 68.25% in 2018, followed by a notable contraction to 61.94% in 2019. A gradual recovery occurred over the subsequent two years, reaching 65.70% in 2021, before retreating to 63.32% in 2022. While this segment consistently maintains the higher absolute margin of the two, it demonstrates greater year-over-year fluctuation.
- Software and Sensors Segment Performance
- The Software and Sensors segment displays a consistent upward trend in profitability. Starting at 51.40% in 2018, the margin expanded steadily to 53.30% in 2019 and experienced a significant increase to 59.37% in 2020. For the remainder of the period, the margin reached a plateau, stabilizing at 59.53% in 2021 and 59.55% in 2022.
- Comparative Margin Analysis
- A convergence trend is observed between the two segments. The margin gap, which was 16.85 percentage points in 2018, narrowed to 3.77 percentage points by 2022. This suggests a shift in the company's profit profile, moving from a heavy reliance on high-margin hardware to a more balanced distribution of profitability as the software segment matured and stabilized.
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Segment Profit Margin: TASER
Axon Enterprise Inc.; TASER; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Gross margin | 336,609) | 287,043) | 229,627) | 174,473) | 172,761) |
| Net sales | 531,566) | 436,927) | 366,552) | 281,661) | 253,115) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 63.32% | 65.70% | 62.65% | 61.94% | 68.25% |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Segment profit margin = 100 × Gross margin ÷ Net sales
= 100 × 336,609 ÷ 531,566 = 63.32%
The TASER segment demonstrates consistent growth in both top-line revenue and absolute gross profit over the five-year period ending December 31, 2022. While absolute financial gains have scaled significantly, the segment profit margin has exhibited moderate volatility, fluctuating within a high-profit range.
- Revenue and Absolute Margin Expansion
- Net sales increased steadily from 253,115 thousand US dollars in 2018 to 531,566 thousand US dollars in 2022, representing a total increase of approximately 109%. In tandem, the absolute gross margin rose from 172,761 thousand US dollars to 336,609 thousand US dollars. This trajectory indicates a robust expansion of market reach and sales volume.
- Segment Profit Margin Trends
- The segment profit margin began at 68.25% in 2018 before experiencing a decline to 61.94% in 2019. A gradual recovery followed, with the margin reaching 65.70% in 2021, before retreating slightly to 63.32% in 2022. These fluctuations suggest that while the segment remains highly lucrative, the cost of goods sold has scaled in a manner that prevents a linear increase in the percentage margin.
- Operational Stability
- Despite the aforementioned volatility, the segment profit margin remained consistently above 60% for the entire duration of the analyzed period. The ability to more than double net sales while maintaining margins between 61.94% and 68.25% indicates a stable operational structure and a strong pricing position within the market.
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Segment Profit Margin: Software and Sensors
Axon Enterprise Inc.; Software and Sensors; segment profit margin calculation
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | |||||
| Gross margin | 392,029) | 253,867) | 186,704) | 132,813) | 85,822) |
| Net sales | 658,369) | 426,454) | 314,451) | 249,199) | 166,953) |
| Segment Profitability Ratio | |||||
| Segment profit margin1 | 59.55% | 59.53% | 59.37% | 53.30% | 51.40% |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
1 2022 Calculation
Segment profit margin = 100 × Gross margin ÷ Net sales
= 100 × 392,029 ÷ 658,369 = 59.55%
The Software and Sensors segment demonstrated significant growth in both revenue and profitability over the five-year period ending December 31, 2022. The data reveals a consistent upward trajectory in scale and a refinement in profit margins that eventually stabilized at a high level.
- Net Sales Trajectory
- Net sales grew consistently from 166,953 thousand US dollars in 2018 to 658,369 thousand US dollars in 2022. The most pronounced growth occurred in the final year of the period, where sales increased significantly between 2021 and 2022, indicating an acceleration in market adoption or expansion.
- Gross Margin Performance
- Gross margin followed a strong positive correlation with net sales, increasing from 85,822 thousand US dollars in 2018 to 392,029 thousand US dollars in 2022. The absolute increase in margin totals reflects the segment's ability to scale its revenue streams effectively.
- Segment Profit Margin Analysis
- The segment profit margin showed a steady upward trend from 51.40% in 2018 to 59.37% in 2020. Between 2020 and 2022, the margin reached a plateau, holding steady at 59.53% in 2021 and 59.55% in 2022. This stabilization indicates that the segment has achieved a state of operational maturity, maintaining a consistent profit ratio despite the rapid increase in total sales volume.
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Net sales
Axon Enterprise Inc., net sales by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| TASER | 531,566) | 436,927) | 366,552) | 281,661) | 253,115) |
| Software and Sensors | 658,369) | 426,454) | 314,451) | 249,199) | 166,953) |
| Total | 1,189,935) | 863,381) | 681,003) | 530,860) | 420,068) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Total net sales demonstrate a strong and consistent upward trajectory from 2018 to 2022, growing from $420,068 thousand to $1,189,935 thousand. This growth reflects an accelerated expansion across all reporting periods, with the company surpassing the $1 billion annual revenue threshold by the end of 2022.
- TASER Segment Performance
- The TASER segment maintained steady year-over-year growth, increasing from $253,115 thousand in 2018 to $531,566 thousand in 2022. This represents a more than twofold increase in sales over the five-year period, indicating sustained market demand for the company's core hardware offerings.
- Software and Sensors Segment Performance
- The Software and Sensors segment exhibited more aggressive growth compared to the TASER segment, rising from $166,953 thousand in 2018 to $658,369 thousand in 2022. This segment nearly quadrupled its revenue, reflecting a rapid scaling of software-based services and sensor technology adoption.
- Segmental Revenue Mix Shift
- A significant shift in the revenue composition is observed between 2018 and 2022. In 2018, the TASER segment was the primary revenue driver, contributing approximately 60% of total net sales. By 2022, the Software and Sensors segment became the dominant contributor, accounting for approximately 55% of total net sales, which indicates a strategic transition toward a software-centric business model.
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Gross margin
Axon Enterprise Inc., gross margin by reportable segment
US$ in thousands
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | |
|---|---|---|---|---|---|
| TASER | 336,609) | 287,043) | 229,627) | 174,473) | 172,761) |
| Software and Sensors | 392,029) | 253,867) | 186,704) | 132,813) | 85,822) |
| Total | 728,638) | 540,910) | 416,331) | 307,286) | 258,583) |
Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).
Total revenue across reportable segments exhibited consistent and accelerated growth from 2018 through 2022, increasing from 258.6 million to 728.6 million. The overall trajectory indicates a strong upward trend in market penetration and scaling across both primary business lines.
- TASER Segment Performance
- The TASER segment showed steady growth, rising from 172.8 million in 2018 to 336.6 million by 2022. Following a period of relative stability between 2018 and 2019, growth accelerated significantly in 2020, with revenue increasing by approximately 31.6% in a single year. The segment continued to expand through 2022, though the rate of growth moderated slightly in the final two years of the period.
- Software and Sensors Segment Performance
- The Software and Sensors segment experienced rapid and aggressive expansion, growing from 85.8 million in 2018 to 392.0 million in 2022. This segment outpaced the TASER line in growth velocity, increasing more than fourfold over the five-year window. A notable surge is observed in 2022, where revenue grew by 54.4% compared to the previous year, marking the highest annual increase for any segment in the dataset.
- Segment Mix and Strategic Transition
- A significant shift in the company's revenue composition is evident. In 2018, the TASER segment was the primary driver, accounting for approximately 66.8% of total revenue, while Software and Sensors contributed 33.2%. By the end of 2022, the proportion shifted, with Software and Sensors becoming the dominant segment at 53.8% of total revenue, while the TASER segment's contribution fell to 46.2%. This transition reflects a pivot toward a more software-heavy business model.
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