Axon Enterprise's (NASDAQ:AXON) investments in improving less lethal weapons and body cameras continues to pay off with another quarter of massive growth and record bookings for body cameras and services. As we've seen over the past few years, top-line growth didn't make it to the bottom line because of investments for the future, but that trend will change as the company grows and adoption of its products increases. 

Second-quarter results released after the market closed on Tuesday showed even more growth on the horizon as bookings increased. Here are the highlights. 

Axon Enterprise's headquarters with graphics of law enforcement on the windows.

Image source: Axon Enterprise.

Axon Enterprise: The raw numbers

Metric Q2 2017 Q2 2016 Year-Over-Year Change
Sales $79.6 million  $58.8 million  26.2% 
Net income $2.3 million  $3.7 million  (37.6%) 
Diluted EPS $0.04  $0.07  (42.9%) 

Data source: Axon Enterprise's second-quarter earnings release.

What happened with Axon Enterprise this quarter? 

When you break down the weapons and body-camera businesses, it's clear that body cameras are the real star of the show at Axon Enterprise. 

  • Weapon sales rose 16%, to $53.0 million, and gross margin was 70% in the quarter. 
  • Software and sensors, which includes body cameras, had a 101% increase in sales, to $26.6 million, and gross margin was 33%. Within that segment, service margin was 70%, including long-term subscriptions, which are the true value in the body-camera business. 
  • Operating expenses rose 44.1% to $44.8 million, driven by a 30.5% increase in selling, general, and administrative (SG&A) spending, and $13 million in research and development (R&D), which was nearly double. This increase in spending is why net income dropped, even with the rapid rise in revenue. 
  • Software and sensor bookings were $81.9 million in the quarter, nearly $10 million more than in any other quarter in history. This large jump in bookings didn't result in higher sales this quarter, but will show up in upcoming shipments of body cameras and through long-term contracts for and other services. 

What management had to say

Management continues to be focused on future growth more than immediate profitability. On top of strong bookings, management thinks there's more potential as it builds out a platform that builds on body cameras. "Our platform approach to technology solutions for law enforcement continues to resonate with our customers, and we are extending our leadership position through innovation which includes a robust product pipeline," said co-founder and CEO Rick Smith in the earnings release.

The Axon Fleet in-car camera solution is part of that platform, and investments in artificial intelligence and records management will add to the value proposition, as well. 

Looking forward

Axon Enterprise is hitting on all cylinders and its investment in improving body camera and software technology is paying off with tremendous growth. As the company introduces new records-management and artificial-intelligence products, the product likely will become even more indispensable to law-enforcement agencies around the world. Eventually, the investment in growth initiatives will slow, and this has the potential to be a highly profitable company with body cameras at its core.

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