AXON ENTERPRISE, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES - continued

(in thousands)

THREE MONTHS ENDED

31 MAR 2024

31 DEC 2023

31 MAR 2023

Net sales

$

460,736

$

432,142

$

343,043

Cost of sales

200,690

168,255

138,941

Gross margin

260,046

263,887

204,102

Stock-based compensation expense

29,595

1,910

1,320

Amortization of acquired intangible assets

1,686

—

—

Adjusted gross margin

$

291,327

$

265,797

$

205,422

Gross margin

56.4

%

61.1

%

59.5

%

Adjusted gross margin

63.2

%

61.5

%

59.9

%

Software and Sensors

THREE MONTHS ENDED

31 MAR 2024

31 DEC 2023

31 MAR 2023

Axon Cloud

Sensors

Axon Cloud

Sensors

Axon Cloud

Sensors

& Services

& Other

Total

& Services

& Other

Total

& Services

& Other

Total

New sales

$

176,467

$

105,521

$

281,988

$

163,632

$

107,167

$

270,799

$

116,453

$

92,308

$

208,761

Cost of sales

47,918

64,714

112,632

41,495

57,597

99,092

31,177

57,001

88,178

Gross margin

128,549

40,807

169,356

122,137

49,570

171,707

85,276

35,307

120,583

Stock-based compensation
expense

1,502

8,312

9,814

964

233

1,197

697

313

1,010

Amortization of acquired
intangible assets

1,348

338

1,686

—

—

—

—

—

—

Adjusted gross margin

$

131,399

$

49,457

$

180,856

$

123,101

$

49,803

$

172,904

$

85,973

$

35,620

$

121,593

Gross margin

72.8

%

38.7

%

60.1

%

74.6

%

46.3

%

63.4

%

73.2

%

38.2

%

57.8

%

Adjusted gross margin

74.5

%

46.9

%

64.1

%

75.2

%

46.5

%

63.8

%

73.8

%

38.6

%

58.2

%