Axon Enterprise, the supplier of Tasers, body cameras and cloud-based software to law enforcement, blew past third-quarter earnings estimates late Tuesday. Axon stock rose back into buy range ahead of Wednesday's open.
The Scottsdale, Ariz., company's bread and butter has been selling to state and local law enforcement. But eight of its top 10 deals in the quarter came from U.S. federal government and international customers.
That shows that Axon has a long runway for growth ahead, but the company keeps pushing the envelope. On the Q3 earnings call, CEO Rick Smith said that Axon showcased a functioning prototype of an AI-powered service at the International Association of Chiefs of Police annual conference last month that got "one of the most positive, strongest reactions I've ever seen in a product."
William Blair analyst Jonathan Ho reiterated an outperform rating for Axon stock. "The company's relentless focus on innovation has allowed it to disrupt markets by improving and evolving products," Ho wrote. "We believe Axon is creating new market opportunities in emerging areas such as generative AI, radio communications, VR and cloud software."
Axon Earnings
Results: Axon reported Q3 adjusted EPS of $1.02. That was 26 cents ahead of estimates and up 70% from a year ago. Revenue grew 33% to $413.6 million vs. $391.1 million estimates. It was the seventh straight quarter with at least 30% growth.
Net revenue retention, meaning the extent to which existing clients either extended, expanded or reduced Axon contracts, was steady at 122%.
Outlook: Axon raised its full-year revenue outlook to $1.55 billion, equating to 30% growth and up from the prior range of $1.51 billion to $1.53 billion. Adjusted EBITDA is now seen at $322 million, up from the earlier implied range of $302 million to $306 million.
The new guidance implies full-year adjusted EBITDA margin of 20.8%, above the earlier guidance of 20%. Axon has a longer-term target of reaching a 25% adjusted EBITDA margin.
Axon said sales of its new Taser 10 stun gun, which nearly doubles the range of the Taser 7, grew about 50% sequentially. The biggest three orders came from international customers and the corrections industry.
The company is still ramping capacity of the Taser 10 and aims to get more capacity automated.
Axon Stock
In early Wednesday stock market action, Axon rose 3% to 222.81. Axon stock has a 217.61 buy point from a 22-week cup-with-handle base, according to MarketSmith.
Axon is part of the flagship IBD 50 list of leading growth stocks.
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