Segment Data

The Company is comprised of two reportable segments: the manufacture and sale of CEWs, batteries, accessories, extended warranties and other products and services (the “TASER Weapons” segment); and the software and sensors business, which includes the sale of devices, wearables, applications, cloud and mobile products (collectively, the “Software and Sensors” segment). Within the Software and Sensors segment, the Company specifies sales of products and services. Revenue from the Company's “products” in the Software and Sensors segment are generally sales of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors,and other products, and is sometimes referred to as Sensors and Other revenue. Revenue from the Company's “services” in the Software and Sensors segment comprise sales related to the Axon Cloud, which includes Evidence.com, cloud-based evidence management software revenue, other recurring cloud-hosted software revenue and related professional services, and is sometimes referred to as Axon Cloud revenue. Within the Software and Sensors segment, the Company includes only revenues and costs attributable to that segment which include: costs of sales for both products and services, direct labor, selling expenses for the sales team, product management and R&D for products included, or to be included, within the Software and Sensors segment. All other costs are included in the TASER Weapons segment. The Company’s Chief Executive Officer, who is the CODM, is not provided asset information by segment, and therefore, no asset information is provided.

Information relative to the Company’s reportable segments was as follows (in thousands):



	Three Months Ended March 31, 2018							Three Months Ended March 31, 2017 ⁽¹⁾
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Net sales from products ⁽²⁾	$	63,524	$	17,450		$	80,974	$	57,671	$	9,820		$	67,491
Net sales from services ⁽³⁾	—		20,241			20,241		—		11,751			11,751
Net sales	63,524		37,691			101,215		57,671		21,571			79,242
Cost of product sales	20,543		11,891			32,434		18,026		9,046			27,072
Cost of service sales	—		4,320			4,320		—		3,500			3,500
Cost of sales	20,543		16,211			36,754		18,026		12,546			30,572
Gross margin	42,981		21,480			64,461		39,645		9,025			48,670
Sales, general and administrative	21,265		14,494			35,759		17,216		13,641			30,857
Research and development	2,960		12,159			15,119		2,212		10,251			12,463
Income (loss) from operations	$	18,756	$	(5,173	)	$	13,583	$	20,217	$	(14,867	)	$	5,350

⁽¹⁾ Amounts for the three months ended March 31, 2017 have not been adjusted under the modified retrospective method of adoption of Topic 606, and are presented consistent with the prior period amounts reported under ASC 605.

⁽²⁾ Software and Sensors “products” revenue consists of sales of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors, and other products, and is sometimes referred to as Sensors and Other revenue.

⁽³⁾Software and Sensors “services” revenue comprises sales related to the Axon Cloud, which includes Evidence.com, cloud-based evidence management software revenue, other recurring cloud-hosted software revenue and related professional services and is sometimes referred to as Axon Cloud revenue.