Revenues

12 Months Ended

Dec. 31, 2023

Revenues.

Revenues

Note 2 - Revenues

Nature of Products and Services

The following table presents our revenues by primary product and service offering (in thousands):

	Year Ended December 31, 2023						Year Ended December 31, 2022
			Software and						Software and
	TASER		Sensors		Total		TASER		Sensors		Total
TASER Devices (Professional)	$	333,923		—		333,923	$	282,698	$	—	$	282,698
Cartridges		193,285		—		193,285		181,686		—		181,686
Axon Evidence and Cloud Services		34,775		566,183		600,958		18,752		371,889		390,641
Extended Warranties		31,689		62,577		94,266		29,008		49,765		78,773
Axon Body Cameras and Accessories		—		183,023		183,023		—		157,281		157,281
Axon Fleet Systems		—		118,129		118,129		—		63,017		63,017
Other (1) (2)		18,933		20,874		39,807		19,422		16,417		35,839
Total	$	612,605	$	950,786	$	1,563,391	$	531,566	$	658,369	$	1,189,935

	Year Ended December 31, 2021
			Software and
	TASER		Sensors		Total
TASER Devices (Professional)	$	234,616	$	—	$	234,616
Cartridges		152,842		—		152,842
Axon Evidence and Cloud Services		9,159		246,005		255,164
Extended Warranties		24,125		33,686		57,811
Axon Body Cameras and Accessories		—		104,080		104,080
Axon Fleet Systems		—		24,319		24,319
Other (1) (2)		16,185		18,364		34,549
Total	$	436,927	$	426,454	$	863,381

⁽¹⁾ TASER segment “Other” includes smaller categories, such as Virtual Reality hardware, CED training revenue such as revenue associated with our Master Instructor School, and TASER consumer device sales.

⁽²⁾ Software and Sensors segment “Other” includes revenue from items including Signal Sidearm, Interview Room and Axon Air.

The following table presents our revenues disaggregated by geography (in thousands):

	Year Ended December 31,
	2023				2022				2021
United States	$	1,338,208	86	%	$	987,975	83	%	$	686,914	80	%
Other Countries		225,183	14			201,960	17			176,467	20
Total	$	1,563,391	100	%	$	1,189,935	100	%	$	863,381	100	%

Contract Balances

The timing of revenue recognition may differ from the timing of invoicing to customers. We generally have an unconditional right to consideration when we invoice our customers and record a receivable. We record a contract asset when revenue is recognized prior to invoicing, or a contract liability (deferred revenue) when revenue will be recognized subsequent to invoicing.

Contract assets generally result from our subscription programs where we satisfy a hardware performance obligation upon shipment to the customer, and the right to the portion of the transaction price allocated to that hardware performance obligation is conditional on our future performance of a SaaS service obligation under the contract. We recognize a portion of the amount allocated to hardware products shipped to the customer as accounts receivable when invoiced to the customer, and record the remaining allocated value as a contract asset as we have generally fulfilled our hardware performance obligation upon shipment. Unbilled accounts receivable expected to be invoiced and collected within 12 months were $4.8 million as of December 31, 2023, and were included in accounts and notes receivable, net on our consolidated balance sheet.

Contract liabilities generally consist of deferred revenue on our subscription programs where we generally invoice customers at the beginning of each annual contract period and record a receivable at the time of invoicing when there is an unconditional right to consideration.

Deferred revenue is composed mainly of unearned revenue related to our Axon Evidence SaaS platform, secure cloud-based storage, service-type extended warranties, stand-ready obligations in our cartridge programs, and rights to future CED, Axon camera and related accessories hardware in our subscription programs. Revenue for Axon Evidence and cloud-based storage, our service-type extended warranties and stand-ready cartridge programs is generally recognized on a straight-line basis over the subscription term. Revenue for the rights to future hardware is generally recognized at the point in time the hardware products are shipped to the customer.

Payment terms and conditions vary by contract type and geography, but our standard terms are that payments are due within 30 days from the date of invoice.

The following table presents our contract assets, contract liabilities and certain information related to these balances as of and for the year ended December 31, 2023 (in thousands):

	Year Ended December 31,
	2023		2022		2021
Contract assets, net	$	353,489	$	242,072	$	210,174
Contract liabilities (deferred revenue)		773,543		608,040		451,312
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period		363,341		261,271		177,812

During the year ended December 31, 2023, our contract assets balance increased by $111.4 million, or 46.0%, due to increased sales under subscription plans. Contract liabilities increased $165.5 million, or 27.2%, for the year ended December 31, 2023 due to increased subscription invoicing for Software and Sensors hardware and services in advance of fulfilling performance obligations to customers.

Contract liabilities (deferred revenue) consisted of the following (in thousands):

	December 31, 2023						December 31, 2022
	Current		Long-Term		Total		Current		Long-Term		Total
Warranty:
TASER	$	14,773	$	18,828	$	33,601	$	14,207	$	17,618	$	31,825
Software and Sensors		33,940		16,036		49,976		26,229		15,338		41,567
		48,713		34,864		83,577		40,436		32,956		73,392
Hardware:
TASER		42,464		29,689		72,153		49,361		12,640		62,001
Software and Sensors		62,635		117,024		179,659		50,426		109,227		159,653
		105,099		146,713		251,812		99,787		121,867		221,654
Services:
TASER		7,939		3,983		11,922		7,637		9,501		17,138
Software and Sensors		329,940		96,292		426,232		212,177		83,679		295,856
		337,879		100,275		438,154		219,814		93,180		312,994
Total	$	491,691	$	281,852	$	773,543	$	360,037	$	248,003	$	608,040

	December 31, 2023						December 31, 2022
	Current		Long-Term		Total		Current		Long-Term		Total
TASER	$	65,176	$	52,500	$	117,676	$	71,205	$	39,759	$	110,964
Software and Sensors		426,515		229,352		655,867		288,832		208,244		497,076
Total	$	491,691	$	281,852	$	773,543	$	360,037	$	248,003	$	608,040

Remaining Performance Obligations

As of December 31, 2023, we had approximately $7.1 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 Topic 606 as of December 31, 2023. We currently expect to recognize between approximately 15% - 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.

Costs to Obtain a Contract

We recognize an asset for the incremental costs of obtaining a contract with a customer, which consist primarily of sales commissions. These costs are ascribed to or allocated to the underlying performance obligations in the contract and amortized consistent with the recognition timing of the revenue for the underlying performance obligations.

For contract costs related to performance obligations with an amortization period of one year or less, we apply the practical expedient to expense these sales commissions when incurred. These costs are recognized as incurred within SG&A expenses on the consolidated statements of operations and comprehensive income.

As of December 31, 2023, our assets for costs to obtain contracts were as follows (in thousands):

	December 31, 2023		December 31, 2022
Current deferred commissions (1)	$	46,335	$	29,405
Deferred commissions, net of current portion (2)		119,401		93,213
	$	165,736	$	122,618

(1) Current deferred commissions are included within prepaid expenses and other current assets on the consolidated balance sheets.

(2) Deferred commissions, net of current portion, are included in other assets on the consolidated balance sheets.

During the years ended December 31, 2023, 2022 and 2021, we recognized $34.0 million, $24.2 million, and $16.6 million, respectively, of amortization related to deferred commissions. These costs are recorded within SG&A expenses on the consolidated statements of operations and comprehensive income (loss).

Significant Judgments

Our contracts with certain municipal government customers may be subject to budget appropriation, other contract cancellation clauses or future periods that are optional. In contracts where the customer’s performance is subject to budget appropriation clauses, we generally consider the likelihood of non-appropriation to be remote when determining the contract term and transaction price. Contracts with other cancellation provisions or optional periods may require judgment in determining the contract term, including the existence of material rights, determining transaction price and identifying the performance obligations.

At times, customers may request changes that either amend, replace or cancel existing contracts. Judgment is required to determine whether the specific facts and circumstances within the contracts require the changes to be accounted for as a separate contract or as a modification. Generally, contract modifications containing additional goods and services that are determined to be distinct and sold at their SSP are accounted for as a separate contract. For contract modifications where both criteria are not met, the original contract is updated and the required adjustments to revenue and contract assets, liabilities and other accounts are made accordingly.

Our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately rather than together may require significant judgment. We consider CED devices and related accessories, as well as Axon cameras and related accessories, to be separately identifiable from each other as well as from extended warranties on these products and the SaaS subscriptions to Axon Evidence and other cloud services.

In contracts where there are timing differences between when we transfer a promised good or service to the customer and when the customer pays for that good or service, we have determined that, with the exception of our TASER 60 installment purchase arrangements, our contracts generally do not include a significant financing component. For the years ended December 31, 2023, 2022, and 2021, we recorded interest income of $0.3 million, $0.6 million and $1.0 million, respectively.

Judgment is required to determine the SSP for each distinct performance obligation. We analyze separate sales of our products and services as a basis for estimating the SSP of our products and services and then use that SSP as the basis for allocating the transaction price when our products and services are sold together in a contract with multiple performance obligations. In instances where the SSP is not directly observable, such as when we do not sell the product or service separately, we determine the SSP using information that may include market conditions, time value of money and other observable inputs. We typically have more than one SSP for individual products and services due to the stratification of those products and services by customers and circumstances. In these instances, we may use information such as geographic region and distribution channel in determining the SSP.