Stockholders' Equity

3 Months Ended

Mar. 31, 2024

Stockholders' Equity

Stockholders' Equity

Note 11 - Stockholders’ Equity

Restricted Stock Units

The following table summarizes RSU activity for the three months ended March 31, 2024 (number of units and aggregate intrinsic value in thousands):

	Number of	Weighted Average		Aggregate
	Units	Grant-Date Fair Value		Intrinsic Value
Units outstanding, beginning of year	1,615	$	193.09
Granted	478		257.49
Released	(174)		213.88
Forfeited	(42)		186.93
Units outstanding, end of period	1,877	$	207.73	$	587,321

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $312.88 per share, multiplied by the number of RSUs outstanding. As of March 31, 2024, there was $321.8 million in unrecognized compensation costs related to RSUs under our stock plans for awards that are expected to vest. We expect to recognize the cost related to the RSUs over a weighted average period of 2.4 years. RSUs are settled when vesting requirements are met.

Certain RSUs that vested in the three months ended March 31, 2024 were net-share settled such that we withheld shares to cover the employees’ tax obligations for the applicable income and other employment taxes, and remitted the cash to the appropriate taxing authorities. Total shares withheld related to RSUs were approximately 8,800 and had an aggregate value of $2.7 million on their respective vesting dates as determined by the closing stock price on such dates. Payments for the employees’ tax obligations are reflected as a financing activity within the condensed consolidated statements of cash flows. We record a liability for the tax withholding to be paid by us as a reduction to additional paid-in capital.

On January 2, 2024, we granted an aggregate of 0.4 million RSUs to employees whose compensation was under a specified threshold. The RSUs generally vest in five annual installments from March 2024 through March 2028. For the three months ended March 31, 2024, there was $29.6 million of stock compensation expense related to these RSUs that was primarily recorded within cost of product and service sales.

Performance Stock Units

The following table summarizes PSU activity for the three months ended March 31, 2024 (number of units and aggregate intrinsic value in thousands):

	Number of	Weighted Average		Aggregate
	Units	Grant-Date Fair Value		Intrinsic Value
Units outstanding, beginning of year	394	$	201.61
Granted	15		284.00
Released	(1)		180.89
Forfeited	(7)		93.32
Units outstanding, end of period	401	$	206.75	$	125,533

Aggregate intrinsic value represents our closing stock price on the last trading day of the period, which was $312.88 per share, multiplied by the number of PSUs outstanding. As of March 31, 2024, there was $51.2 million in unrecognized compensation costs related to PSUs under our stock plans for awards that are expected to vest. We expect to recognize the cost related to the PSUs over a weighted average period of 2.7 years. PSUs are settled when vesting requirements are met.

2024 CEO Performance Award and 2024 eXponential Stock Plan

On October 14, 2023, our Board of Directors approved the 2024 eXponential Stock Plan (the “2024 Employee XSP”) and, on December 20, 2023, the Board approved a pool of 4,516,370 shares of our common stock to be reserved for grants of awards of eXponential Stock Units (“2024 XSUs”) to employees under the 2024 Employee XSP, including those who elected to have compensation withheld in order to participate in the 2024 Employee XSP. The 2024 XSUs are grants of performance-based RSUs, each with a term of approximately seven years, that vest in seven substantially equal tranches.  Additionally, on December 18, 2023, the Compensation Committee granted to our Chief Executive Officer an award of 2024 XSUs covering 679,102 shares of our common stock (the “2024 CEO Performance Award”). Both the 2024 Employee XSP and the 2024 CEO Performance Award are subject to shareholder approval at our upcoming Annual Meeting of Shareholders. Dollar-denominated awards granted under the 2024 Employee XSP and the 2024 CEO Performance Award were converted to 2024 XSUs using a price per share of common stock of $220.88, which reflects the 90-day volume weighted average price per share as of the trading day preceding the grant date. Neither the 2024 Employee XSP nor the 2024 CEO Performance Award will have a financial statement impact unless and until either or both are approved by shareholders at our Annual Meeting of Shareholders in May 2024.

Stock Option Activity

Options outstanding and exercisable for the period ended March 31, 2024 was 0.5 million with a weighted average exercise price of $28.58 and a weighted average remaining contractual life of 3.9 years. The aggregate intrinsic value was $150.9 million and represents the difference between the exercise price of the underlying stock options and the closing stock price on the last trading day of the period ended March 31, 2024, which was $312.88. There was no stock option activity for the three months ended March 31, 2024.

Stock-based Compensation Expense

The following table summarizes the composition of stock-based compensation expense for the three months ended March 31, 2024 and 2023 (in thousands):

	Three Months Ended March 31,
	2024		2023
Cost of product sales and service sales	$	29,595	$	1,320
Sales, general and administrative expenses		23,155		15,445
Research and development expenses		22,365		17,585
Total stock-based compensation expense	$	75,115	$	34,350

Stock Incentive Plan

In May 2022, our shareholders approved the Axon Enterprise, Inc. 2022 Stock Incentive Plan (the “2022 Plan”) authorizing an additional 2.5 million shares, plus remaining available shares under prior plans, for issuance under the 2022 Plan. Combined with the shares of our common stock available under our legacy stock incentive plans, there are 1.3 million shares of our common stock available for grant as of March 31, 2024.

Stock Repurchase Plan

In February 2016, our Board of Directors authorized a stock repurchase program to acquire up to $50.0 million of our outstanding common stock subject to stock market conditions and corporate considerations. During the three months ended March 31, 2024 and 2023, no common shares were purchased under the program. As of March 31, 2024, $16.3 million remains available under the plan for future purchases. Any future purchases will be discretionary.

At-The-Market Equity Offering

During the year ended December 31, 2023, we sold 467,594 shares of our common stock under our “at-the-market” equity offering program (the “ATM”). We generated approximately $96.4 million in aggregate gross proceeds from sales under the ATM. Aggregate net proceeds from the ATM were $94.7 million after deducting related expenses, including commissions to the sales agent and issuance costs of $1.7 million. No shares were sold during the three months ended March 31, 2024.

We were authorized to sell up to a total of 3.0 million shares of our common stock under the ATM, with approximately 2.0 million shares remaining as of March 31, 2024. The ATM expired on April 20, 2024; however, we may amend and extend the program to facilitate the sales of the shares remaining from time to time. We intend to use the net proceeds from this offering program for general corporate purposes, which may include, among other things, providing capital to satisfy a portion of the tax obligations related to the vesting and settlement of stock compensation awards granted to our executive officers and other employees under our stock plans, to support our growth, and to acquire or invest in product lines, products, services, technologies or facilities.