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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

or

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                   

Commission File Number: 001-16391

Axon Enterprise, Inc.

(Exact name of registrant as specified in its charter)

Delaware

86-0741227

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

17800 North 85th Street

Scottsdale,  Arizona

85255

(Address of principal executive offices)

(Zip Code)

(480) 991-0797

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.00001 Par Value

AXON

The Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

Non-accelerated Filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes       No  

The number of shares of the registrant’s common stock outstanding as of November 10, 2021 was 68,467,571.

Table of Contents

AXON ENTERPRISE, INC.

INDEX TO QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

Page

Special Note Regarding Forward-Looking Statements

ii

PART I - FINANCIAL INFORMATION

1

Item 1. Financial Statements

1

Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020

1

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) for the Three Months and Nine Months Ended September 30, 2021 and 2020

2

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three Months and Nine Months Ended September 30, 2021 and 2020

3

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020

5

Notes to Unaudited Condensed Consolidated Financial Statements

6

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3. Quantitative and Qualitative Disclosures About Market Risk

46

Item 4. Controls and Procedures

47

PART II - OTHER INFORMATION

47

Item 1. Legal Proceedings

47

Item 1A. Risk Factors

47

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

48

Item 3. Defaults Upon Senior Securities

48

Item 4. Mine Safety Disclosures

48

Item 5. Other Information

48

Item 6. Exhibits

49

SIGNATURES

50

Table of Contents

Special Note Regarding Forward-Looking Statements

This Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including statements regarding our expectations, beliefs, intentions and strategies regarding the future. We intend that such forward-looking statements be subject to the safe-harbor provided by the Private Securities Litigation Reform Act of 1995. From time to time, we also provide forward-looking statements in other materials we release to the public as well as verbal forward-looking statements. These forward-looking statements include, without limitation, statements regarding: proposed products and services and related development efforts and activities; our projected revenue and capital expenditures for the full year 2021; expectations about the market for our current and future products and services; the impact of pending litigation; strategies and trends relating to subscription plan programs and revenues; our anticipation that contracts with governmental customers will be fulfilled; strategies and trends, including the benefits of, research and development investments; the sufficiency of our liquidity and financial resources; expectations about customer behavior; the impact on our investment portfolio of changes in interest rates; our potential use of foreign currency forward and option contracts; statements concerning projections, predictions, expectations, estimates or forecasts as to our business, financial and operational results and future economic performance; statements of management’s strategies, goals and objectives and other similar expressions; as well as the ultimate resolution of financial statement items requiring critical accounting estimates, including those set forth in our Form 10-K for the year ended December 31, 2020. Such statements give our current expectations or forecasts of future events; they do not relate strictly to historical or current facts. Words such as “may,” “will,” “should,” “could,” “would,” “predict,” “potential,” “continue,” “expect,” “anticipate,” “future,” “intend,” “plan,” “believe,” “estimate,” and similar expressions, as well as statements in future tense, identify forward-looking statements. However, not all forward-looking statements contain these identifying words.

We cannot guarantee that any forward-looking statement will be realized, although we believe we have been prudent in our plans and assumptions. Achievement of future results is subject to risks, uncertainties and potentially inaccurate assumptions. The following important factors could cause actual results to differ materially from those in the forward-looking statements: the potential global impacts of the COVID-19 pandemic; our exposure to cancellations of government contracts due to appropriation clauses, exercise of a cancellation clause, or non-exercise of contractually optional periods; our ability to design, introduce and sell new products or features; our ability to defend against litigation and protect our intellectual property, and the resulting costs of this activity; our ability to manage our supply chain and avoid production delays, shortages, and impacts to expected gross margins; the impact of stock compensation expense, impairment expense, and income tax expense on our financial results; customer purchase behavior, including adoption of our software as a service delivery model; negative media publicity regarding our products; the impact of product mix on projected gross margins; defects in our products; changes in the costs of product components and labor; loss of customer data, a breach of security, or an extended outage, including by our third party cloud-based storage providers; exposure to international operational risks; delayed cash collections and possible credit losses due to our subscription model; changes in government regulations in the U.S. and in foreign markets, especially related to the classification of our products by the United States Bureau of Alcohol, Tobacco, Firearms and Explosives; our ability to integrate acquired businesses; our ability to attract and retain key personnel; and counter-party risks relating to cash balances held in excess of FDIC insurance limits. Many events beyond our control may determine whether results we anticipate will be achieved. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could differ materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements. The Annual Report on Form 10-K that we filed with the Securities and Exchange Commission ("SEC") on February 26, 2021 lists various important factors that could cause actual results to differ materially from expected and historical results. These factors are intended as cautionary statements for investors within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act. Readers can find them under the heading “Risk Factors” in the Report on Form 10-K, and investors should refer to them. You should understand that it is not possible to predict or identify all such factors. Consequently, you should not consider any such list to be a complete set of all potential risks or uncertainties.

Except as required by law, we undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in our Form 10-Q, 8-K and 10-K reports to the SEC. Our filings with the SEC may be accessed at the SEC’s web site at www.sec.gov.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

AXON ENTERPRISE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

    

September 30,

December 31, 

2021

2020

(Unaudited)

ASSETS

 

  

 

  

Current assets:

 

  

 

  

Cash and cash equivalents

$

281,691

$

155,440

Marketable securities

83,340

Short-term investments

 

216,557

 

406,525

Accounts and notes receivable, net of allowance of $2,425 and $2,105 as of September 30, 2021 and December 31, 2020, respectively

 

265,267

 

229,201

Contract assets, net

 

130,976

 

63,945

Inventory

 

93,279

 

89,958

Prepaid expenses and other current assets

 

52,710

 

36,883

Total current assets

 

1,123,820

 

981,952

Property and equipment, net

 

128,808

 

105,494

Deferred tax assets, net

 

104,169

 

45,770

Intangible assets, net

 

7,426

 

9,448

Goodwill

 

25,571

 

25,205

Long-term investments

 

49,431

 

90,681

Long-term notes receivable, net of current portion

 

12,621

 

22,457

Long-term contract assets, net

43,394

20,099

Strategic investments

58,520

11,711

Other assets

 

91,627

 

68,206

Total assets

$

1,645,387

$

1,381,023

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

Current liabilities:

 

  

 

  

Accounts payable

$

27,418

$

24,142

Accrued liabilities

 

88,894

 

59,843

Current portion of deferred revenue

 

250,651

 

163,959

Customer deposits

 

6,118

 

2,956

Other current liabilities

 

6,809

 

5,431

Total current liabilities

 

379,890

 

256,331

Deferred revenue, net of current portion

 

111,892

 

111,222

Liability for unrecognized tax benefits

 

4,580

 

4,503

Long-term deferred compensation

 

5,125

 

4,732

Deferred tax liability, net

155

649

Other long-term liabilities

 

29,842

 

27,331

Total liabilities

 

531,484

 

404,768

Commitments and contingencies (Note 13)

 

  

 

  

Stockholders’ equity:

 

  

 

  

Preferred stock, $0.00001 par value; 25,000,000 shares authorized; no shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

Common stock, $0.00001 par value; 200,000,000 shares authorized; 67,577,868 and 63,766,555 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

1

 

1

Additional paid-in capital

 

1,147,478

 

962,159

Treasury stock at cost, 20,220,227 shares as of September 30, 2021 and December 31, 2020

 

(155,947)

 

(155,947)

Retained earnings

 

123,391

 

169,901

Accumulated other comprehensive income (loss)

 

(1,020)

 

141

Total stockholders’ equity

 

1,113,903

 

976,255

Total liabilities and stockholders’ equity

$

1,645,387

$

1,381,023

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME (LOSS)

(in thousands, except per share data)

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Net sales from products

$

165,803

$

120,091

$

463,116

$

326,134

Net sales from services

 

66,186

 

46,351

 

182,687

 

128,729

Net sales

 

231,989

 

166,442

 

645,803

 

454,863

Cost of product sales

 

71,336

 

57,798

 

195,253

 

150,507

Cost of service sales

 

16,086

 

10,404

 

44,701

 

29,331

Cost of sales

 

87,422

 

68,202

 

239,954

 

179,838

Gross margin

 

144,567

 

98,240

 

405,849

 

275,025

Operating expenses:

 

  

 

  

 

  

 

  

Sales, general and administrative

 

99,295

 

74,443

 

403,554

 

209,763

Research and development

 

42,382

 

29,246

 

143,352

 

85,187

Total operating expenses

 

141,677

 

103,689

 

546,906

 

294,950

Income (loss) from operations

 

2,890

 

(5,449)

 

(141,057)

 

(19,925)

Interest and other income (expense), net

 

(5,530)

 

2,040

 

36,896

 

4,594

Loss before provision for income taxes

 

(2,640)

 

(3,409)

 

(104,161)

 

(15,331)

Provision for (benefit from) income taxes

 

(51,164)

 

(2,536)

 

(57,651)

 

12,227

Net income (loss)

$

48,524

$

(873)

$

(46,510)

$

(27,558)

Net income (loss) per common and common equivalent shares:

 

  

 

  

 

  

 

  

Basic

$

0.73

$

(0.01)

$

(0.71)

$

(0.45)

Diluted

$

0.67

$

(0.01)

$

(0.71)

$

(0.45)

Weighted average number of common and common equivalent shares outstanding:

 

  

 

  

 

  

 

  

Basic

 

66,192

 

63,496

 

65,139

 

61,159

Diluted

 

72,441

 

63,496

 

65,139

 

61,159

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

Net income (loss)

$

48,524

$

(873)

$

(46,510)

$

(27,558)

Foreign currency translation adjustments

 

(793)

 

1,238

 

(1,161)

 

(456)

Comprehensive income (loss)

$

47,731

$

365

$

(47,671)

$

(28,014)

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

    

    

    

    

    

    

    

Accumulated

    

Additional

Other

Total

Common Stock

Paid-in

Treasury Stock

Retained

Comprehensive

Stockholders’

Shares

Amount

Capital

Shares

Amount

Earnings

Income (Loss)

Equity

Balance, December 31, 2020

 

63,766,555

$

1

$

962,159

 

20,220,227

$

(155,947)

$

169,901

$

141

$

976,255

Issuance of common stock under employee plans, net

 

906,536

(7,045)

 

(7,045)

Stock-based compensation

 

89,610

 

89,610

Net loss

 

(47,917)

 

(47,917)

Foreign currency translation adjustments

 

1

1

Balance, March 31, 2021

 

64,673,091

$

1

$

1,044,724

 

20,220,227

$

(155,947)

$

121,984

$

142

$

1,010,904

Issuance of common stock under employee plans, net

 

1,001,255

 

 

(3,268)

 

 

 

 

 

(3,268)

Stock-based compensation

 

 

 

137,549

 

 

 

 

 

137,549

Net loss

 

 

 

 

 

 

(47,117)

 

 

(47,117)

Foreign currency translation adjustments

 

 

 

 

 

 

 

(369)

 

(369)

Balance, June 30, 2021

 

65,674,346

$

1

$

1,179,005

 

20,220,227

$

(155,947)

$

74,867

$

(227)

$

1,097,699

Issuance of common stock

577,956

105,615

105,615

Issuance of common stock under employee plans, net

 

1,325,566

 

 

(172,204)

 

 

 

 

 

(172,204)

Stock-based compensation

 

 

 

35,062

 

 

 

 

 

35,062

Net income

 

 

 

 

 

 

48,524

 

 

48,524

Foreign currency translation adjustments

 

 

 

 

 

 

 

(793)

 

(793)

Balance, September 30, 2021

 

67,577,868

$

1

$

1,147,478

 

20,220,227

$

(155,947)

$

123,391

$

(1,020)

$

1,113,903

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Table of Contents

    

    

    

    

    

    

    

    

    

    

    

    

    

Accumulated

    

    

Additional

Other

Total

Common Stock

Paid-in

Treasury Stock

Retained

Comprehensive

Stockholders’

Shares

Amount

Capital

Shares

Amount

Earnings

Loss

Equity

Balance, December 31, 2019

    

59,497,759

$

1

$

528,272

 

20,220,227

$

(155,947)

$

172,265

$

(1,096)

    

$

543,495

Cumulative effect of applying a change in accounting principle, net of tax

 

 

 

 

 

 

(640)

 

 

(640)

Issuance of common stock under employee plans, net

 

315,404

 

 

(5,162)

 

 

 

 

 

(5,162)

Stock-based compensation

 

 

20,195

 

 

 

 

 

20,195

Net income

 

 

 

 

 

 

4,074

 

4,074

Foreign currency translation adjustments

 

 

 

 

 

 

 

(2,372)

 

(2,372)

Balance, March 31, 2020

 

59,813,163

$

1

$

543,305

 

20,220,227

$

(155,947)

$

175,699

$

(3,468)

$

559,590

Issuance of common stock

 

3,450,000

 

 

306,779

 

 

 

 

 

306,779

Issuance of common stock under employee plans, net

 

134,571

 

 

(310)

 

 

 

 

 

(310)

Stock-based compensation

 

 

 

33,835

 

 

 

 

 

33,835

Issuance of common stock for business combination contingent consideration

 

70,613

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

(30,759)

 

 

(30,759)

Foreign currency translation adjustments

 

 

 

 

 

 

 

678

 

678

Balance, June 30, 2020

 

63,468,347

$

1

$

883,609

 

20,220,227

$

(155,947)

$

144,940

$

(2,790)

$

869,813

Issuance of common stock under employee plans, net

 

79,734

 

 

(1,119)

 

 

 

 

 

(1,119)

Stock-based compensation

 

 

 

26,094

 

 

 

 

 

26,094

Net loss

 

 

 

 

 

 

(873)

 

 

(873)

Foreign currency translation adjustments

 

 

 

 

 

 

 

1,238

 

1,238

Balance, September 30, 2020

 

63,548,081

$

1

$

908,584

 

20,220,227

$

(155,947)

$

144,067

$

(1,552)

$

895,153

The accompanying notes are an integral part of these condensed consolidated financial statements.

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Table of Contents

AXON ENTERPRISE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

Nine Months Ended September 30, 

    

2021

    

2020

Cash flows from operating activities:

 

  

 

  

Net loss

$

(46,510)

$

(27,558)

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization

 

13,420

 

8,944

Loss on disposal and abandonment of intangible assets

 

130

 

252

Loss on disposal and impairment of property and equipment, net

 

74

 

1,429

Net gain on strategic investments and marketable securities

(34,195)

Stock-based compensation

 

262,221

 

80,124

Deferred income taxes

 

(58,893)

 

(11,670)

Unrecognized tax benefits

 

77

 

573

Bond premium amortization

4,606

1,830

Noncash lease expense

 

4,087

 

2,743

Provision for expected credit losses

615

776

Change in assets and liabilities:

 

 

Accounts and notes receivable and contract assets

 

(118,094)

 

(48,551)

Inventory

 

(3,154)

 

(59,371)

Prepaid expenses and other assets

 

(28,906)

 

(4,822)

Accounts payable, accrued and other liabilities

 

28,528

 

25,365

Deferred revenue

 

87,558

 

34,099

Net cash provided by operating activities

 

111,564

 

4,163

Cash flows from investing activities:

 

  

 

  

Purchases of investments

 

(362,479)

 

(516,687)

Proceeds from call / maturity of investments

 

499,172

 

287,199

Proceeds from sale of strategic investments

14,546

Purchases of property and equipment

 

(36,501)

 

(66,023)

Proceeds from disposal of property and equipment

31

94

Purchases of intangible assets

 

(157)

 

(177)

Strategic investments

 

(20,500)

 

(4,700)

Business acquisition, net of cash acquired

(700)

Net cash provided by (used in) investing activities

 

93,412

 

(300,294)

Cash flows from financing activities:

 

  

 

  

Net proceeds from equity offering

 

105,615

 

306,779

Proceeds from options exercised

 

 

295

Income and payroll tax payments for net-settled stock awards

 

(182,517)

 

(6,886)

Net cash provided by (used in) financing activities

 

(76,902)

 

300,188

Effect of exchange rate changes on cash and cash equivalents

 

(1,827)

 

(303)

Net increase in cash and cash equivalents

 

126,247

 

3,754

Cash and cash equivalents and restricted cash, beginning of period

 

155,551

 

172,355

Cash and cash equivalents and restricted cash, end of period

$

281,798

$

176,109

Supplemental disclosures:

 

  

 

  

Cash and cash equivalents

$

281,691

$

176,000

Restricted cash (Note 1)

 

107

 

109

Total cash, cash equivalents and restricted cash shown in the statements of cash flows

$

281,798

$

176,109

Cash paid for income taxes, net of refunds

$

5,016

$

7,678

Non-cash transactions

 

  

 

  

Property and equipment purchases in accounts payable and accrued liabilities

$

1,211

$

1,734

The accompanying notes are an integral part of these condensed consolidated financial statements.

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AXON ENTERPRISE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 - Organization and Summary of Significant Accounting Policies

Axon Enterprise, Inc. (“Axon,” the “Company,” "we," or "us") is a market-leading provider of law enforcement technology solutions. Our core mission is to protect life. We fulfill that mission through developing hardware and software products that advance the long term objectives of a) obsoleting the bullet, b) reducing social conflict, and c) enabling a fair and effective justice system.

Our headquarters in Scottsdale, Arizona houses our executive management, sales, marketing, certain engineering, manufacturing, finance and other administrative support functions. Our global software hub is located in Seattle, Washington, and we also have subsidiaries and / or offices located in Australia, Canada, Finland, Germany, Hong Kong, India, Italy, the Netherlands, the United Kingdom, and Vietnam.

The accompanying unaudited condensed consolidated financial statements include the accounts of Axon Enterprise, Inc. and our wholly owned subsidiaries. All material intercompany accounts, transactions, and profits have been eliminated.

Basis of Presentation and Use of Estimates

These unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the SEC. Certain information related to our organization, significant accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) has been condensed or omitted. The accounting policies followed in the preparation of these unaudited condensed consolidated financial statements are consistent with those followed in our annual consolidated financial statements for the year ended December 31, 2020, as filed on Form 10-K, with the exception of our adoption of certain accounting pronouncements which we describe below. In the opinion of management, these unaudited condensed consolidated financial statements contain all material adjustments, consisting only of normal recurring adjustments, necessary to fairly state our financial position, results of operations and cash flows for the periods presented and the presentations and disclosures herein are adequate when read in conjunction with our Form 10-K for the year ended December 31, 2020. The results of operations for the three months and nine months ended September 30, 2021 are not necessarily indicative of the results to be expected for the full year (or any other period). Significant estimates and assumptions in these unaudited condensed consolidated financial statements include:

product warranty reserves,
inventory valuation,
revenue recognition,
reserve for expected credit loss,
valuation of goodwill, intangible and long-lived assets,
recognition, measurement and valuation of current and deferred income taxes,
stock-based compensation, and
recognition and measurement of contingencies and accrued litigation expense.

Actual results could differ materially from those estimates.

Segment Information

Our operations are comprised of two reportable segments: the manufacture and sale of conducted electrical devices ("CEDs"), batteries, accessories, extended warranties and other products and services (the “TASER” segment); and the development, manufacture, and sale of software and sensors, which includes the sale of devices, wearables, applications, cloud and mobile products, and services (collectively, the “Software and Sensors” segment). In both segments, we report sales of products and services. Service revenue in both segments includes sales related to Axon

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AXON ENTERPRISE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS – (Continued)

Evidence. In the Software and Sensors segment, service revenue also includes other recurring cloud-hosted software revenue and related professional services. Collectively, this revenue is sometimes referred to as "Axon Cloud revenue."  

Reportable segments are determined based on discrete financial information reviewed by our Chief Executive Officer who is our chief operating decision maker ("CODM"). We organize and review operations based on products and services, and currently there are no operating segments that are aggregated. We perform an analysis of our reportable segments at least annually. Additional information related to our business segments is summarized in Note 15.

Geographic Information and Major Customers / Suppliers

For the three and nine months ended September 30, 2021, no individual country outside the U.S. represented more than 10% of total net sales. Individual sales transactions in the international market are generally larger and occur more intermittently than in the domestic market due to the profile of our customers. For the three and nine months ended September 30, 2021, no customer represented more than 10% of total net sales. At September 30, 2021 and December 31, 2020, no customer represented more than 10% of the aggregate balance of accounts and notes receivable and contract assets.

We currently purchase both off the shelf and custom components, including, but not limited to, finished circuit boards, injection-molded plastic components, small machined parts, custom cartridge components, electronic components, and off the shelf sub-assemblies from suppliers located in the U.S., Canada, China, Israel, Republic of Korea, Mexico, Sri Lanka, and Taiwan. Although we currently obtain many of these components from single source suppliers, we own the injection molded component tooling, most of the designs, and the test fixtures used in their production for all custom components. As a result, we believe we could obtain alternative suppliers in most cases without incurring significant production delays. Although we have experienced supply chain disruptions relating to port constraints, we have remained focused on closely managing our supply chain. We continue to bolster our strategic relationships in our supply chain, identifying secondary/alternate sourcing, adjusting build plans accordingly, and building in logistic modes in support of our increasing demand while working to minimize disruption to customers. We acquire most of our components on a purchase order basis and do not have any significant long-term contracts with component suppliers.

Income per Common Share

Basic income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the periods presented. Diluted income per share reflects the potential dilution from outstanding stock options and unvested restricted stock units. The calculation of the weighted average number of shares outstanding and earnings per share are as follows (in thousands except per share data):

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2021

    

2020

    

2021

    

2020

Numerator for basic and diluted earnings per share:

 

  

 

  

 

  

 

  

Net income (loss)

$

48,524

$

(873)

$

(46,510)

$

(27,558)

Denominator:

 

  

 

  

 

  

 

Weighted average shares outstanding

 

66,192

 

63,496

 

65,139

 

61,159

Dilutive effect of stock-based awards

 

6,249

 

 

 

Diluted weighted average shares outstanding

 

72,441

 

63,496

 

65,139

 

61,159

Anti-dilutive stock-based awards excluded

 

3,481

 

12,793

 

8,920

 

12,904

Net loss per common share:

 

 

  

 

  

 

  

Basic

$

0.73

$

(0.01)

$

<