Good day, ladies and gentlemen, and welcome to the Q4 2017 Axon Enterprise Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If anyone should require assistance during the conference, please press star then zero on your touch-tone telephone. As a reminder, this conference may be recorded. I would like to introduce your host for today's conference, Luke Larson, President. You may begin.
Thank you, good afternoon to everyone. I'm Luke Larson, President of Axon. Welcome to Axon's fourth quarter 2017 earnings conference call. Joining on today's call from management are Rick Smith, CEO and founder, and Jawad Ahsan, our Chief Financial Officer. Before we get started, Andrea James, our VP of Investor Relations, will read the safe harbor statement.
Good afternoon. This call is being broadcast on the internet and is available on the investor relations section of the Axon Enterprise website. During our call, we'll be making references to our reported results, which you can find by reading our quarterly shareholder letter and the supplemental materials, both of which are available at investor.axon.com and on the SEC website. We'll start today's session with prepared remarks, then we'll move to a live Q&A session. Statements made on today's call will include forward-looking statements, including statements regarding our expectations, beliefs, intentions, or strategies regarding the future, including statements around projected spending. We intend that such forward-looking statements will be subject to the safe harbor provided by the Private Securities Litigation Reform Act of 1995.
This forward-looking information is based upon current information and expectations regarding Axon Enterprise, these estimates and statements speak only as of the date on which they are made, are not guarantees of future performance, and involve certain risks, uncertainties, and assumptions that are difficult to predict. All forward-looking statements that are made on today's call are subject to risks and uncertainties that could cause our actual results to differ materially. These risks are discussed in greater detail in our annual reports on the Form 10-K and our quarterly reports on the Form 10-Q under the caption Risk Factors. You may find these filings as well as other SEC filings at investor.axon.com or at sec.gov by searching for filings under the Axon ticker, AAXN. Now turning the call over to Rick Smith, our CEO and founder.
Thanks, Andrea, and good afternoon, everyone. Thank you for joining us, and welcome to day one in the next decade of Axon's mission to protect life. 2017 was a big year for Axon, and I'm extremely proud of what our team has accomplished. We executed on our short-term goals and at the same time laid the foundation to drive continued top-line growth and long-term profitability. There are several highlights from the year that I want to recap. First and foremost, we changed our name from TASER International to Axon Enterprise to better reflect what is now an unprecedented platform of devices, software, and technology. Next, we completed the enormous task of migrating 20 million gigabytes or 20 petabytes of data onto Microsoft's Azure cloud.
Let me tell you, this was no small feat, and I could not be more proud of our team who worked tirelessly to make it happen seamlessly for our customers. Back to my recap of the year, we also launched our artificial intelligence group, Axon AI. We accelerated market adoption of our body camera program. We expanded our product ecosystem with Axon Fleet, an in-car video system, and we've started to take market share in this new market. We grew our booked license count on Evidence.com to more than 200,000 seats. We introduced Signal Sidearm, which allows all of our cameras in a certain radius to begin recording after a firearm is drawn. We rolled out Axon Citizen, which allows the public to submit evidence, and we enhanced our board of directors and expanded our leadership teams across IT, product, and finance while promoting some of our existing superstars.
Notably, we brought in financial leadership that significantly deepens our bench and has already facilitated a new culture of discipline that will enable us to deliver increased profit and drive greater shareholder value. I couldn't be enjoying working with anyone more than I have with Jawad this past six months. It's great to have you aboard. Jawad will discuss our OpEx shortly, but suffice to say, we enter 2018 with good progress under our belt and expect to continue that momentum. In 2017, we delivered record revenue of $344 million, and we also ended the year with software and sensor bookings up 15%. Importantly, we continued to make progress against our four key areas of growth, which are, one, TASER weapons; two, evidence management software and body cameras; three, Axon Fleet; and four, Axon Records.
With that as a backdrop, I'm incredibly excited about our plans for 2018 and the way our team has come together to embrace our new mantra of being scrappy to drive leverage. We've long had a culture of excellence, hard work, and fun, what I view as a collegial atmosphere at Axon. That will not change. It will be enhanced by disciplined financial management combined with top-line growth. Broadly speaking, Axon is at a new juncture. We have a platform of innovative and interconnected businesses that will allow us to continue creating and dominating new markets. You heard our perspective and the path we're taking at our November Analyst Day. We believe our market position and the opportunity to drive shareholder value is unique. We've continued to shift our business model.
Our mission is clear, our teams are invigorated. We're all looking forward to keeping you updated on our progress. As you have no doubt seen, today we also announced a new plan for me to lead this amazing company, these amazing people, through the next decade. Later this week, I look forward to accepting my last paycheck for the next 10 years. I'll be shifting to a 100% performance compensation package based on stock options that only vest if we can increase the market capitalization through a range from starting at a doubling to a tenfold increase, coupled with financial operating targets to ensure we're building both shareholder value and financial rigor. The plan development was led by Hadi Partovi and our compensation committee. Is largely inspired by the recent program announced by Tesla for its CEO, Elon Musk.
I'll tell you, I'm incredibly excited at the opportunity to earn back a share of the company I founded 25 years ago, if we can deliver 10x results. I also relish the accountability of knowing that I will take home nothing from this plan if we don't at least double the market cap based on the six-month averages starting today, while either doubling revenue or tripling adjusted EBITDA, just to get to the first milestone. Jawad can give some more details later. Of course this plan is contingent upon you, our shareholders, voting to implement it at our upcoming shareholder meeting in May. I can tell you, I'm pumped and ready to roll. With that, I'll turn over to Luke.
Thanks, Rick. You should all have our reported financial results and shareholder letter in front of you. Let me add some color by taking a look at where our teams will be focusing their energy in the new year. First, I'll talk about product development. Second, I'll give some color about our execution. For product, 2018 is going to be another year of intense innovation for us. We'll be launching several new products, including Axon Records, a breakthrough record management system built to fully integrate audio and video data. To leverage artificial intelligence to streamline report creation, in addition to several game-changing enterprise software add-ons, and other products that fit into our four strategic growth categories highlighted by Rick. Evidence.com is constantly improving.
For those of you who are new to Axon, briefly, Evidence.com is our cloud-based digital evidence management system that stores body-worn camera video and does so much more. We are constantly improving this product, adding new features upon our customers' requests for our different pricing tiers. We send out updates in real time to improve the user experience. For example, most recently, we dramatically reduced the time it takes to search for videos uploaded to Evidence.com. We're excited about the increasing utility of Evidence.com. Today, the platform hosts officer body cam video. That's great. Our customers need the software to do more. We're developing enhancements that will enable Evidence.com to seamlessly take in CCTV footage and other forms of video and audio evidence.
We can't touch on all of our products today, especially as our suite grows, but I want to note that we're seeing good traction with Axon Citizen, which is the community evidence submission tool that we announced in Q4. Oxnard Police Department out of Southern California put out a video to their entire community outlining how they could submit evidence via their smartphones to the police agency using Axon Citizen. Fort Worth Police Department in Texas also announced they were doing an entire agency-wide trial of Axon Citizen. The second area of focus I want to cover is our ability to execute on our growing TAM. Back office operations might not be that glamorous, but it's important to get these things right, and we feel really confident about the decisions we are making to support our growth.
We are scaling up our offices across the world. We have set a priority in 2018 to cross-pollinate our internal groups to ensure we execute against one vision for Axon. For perspective, in 2017 alone, our net head count increased by 250, reflecting 36% growth. We've recently added staff in key markets including Scottsdale, Seattle, London, Frankfurt, Finland, Amsterdam, Sydney, Vietnam and New York. Our senior leaders are spending time on the ground in these areas and working across functions to keep the global team marching in lockstep. We're also consolidating our global logistics group as we prepare for continued international growth. We recently folded our EMEA logistics and operations responsibilities into one global logistics group. During the past year, this group dramatically improved our HQ customer fulfillment and warehousing operations. They also crafted a strategic warehousing plan and developed new key transportation partnerships.
We also recently opened a distribution center in Melbourne, Australia, which is becoming an increasingly important market for us. Hopefully you saw our announcement earlier this month that in the first quarter of this year, Victoria Police in Australia ordered 11,000 Body 2 cameras and secured a five-year subscription to Evidence.com. We believe we now have a solid foundation in place to provide even better support to our international customers going forward. Joining forces is one of our internal core values and encourages people to step outside of their individual silos. We already see this happening. We believe this will be critical to the organization as we continue to grow. I'll hand the call over to Jawad, who will talk about our financial results and outlook.
Thanks, Luke. We have a lot of good things to talk about this quarter from a financial perspective. We delivered solid fourth quarter results with record revenue, strong gross margins, and adjusted earnings per share above consensus. Fourth quarter revenue came in at $95 million, reflecting 15% growth year-over-year. We saw strength across the board. Weapons revenue grew 10%. Software and sensors revenue was up a healthy 27%, reflecting a large number of customer add-ons and another record quarter of competitor conversion wins. We'll come back to gross margin and operating margin in a minute. I wanted to jump down to the bottom line first to point out that in Q4, we had an $8 million non-cash tax expense related to U.S. tax reform. This put us at a GAAP EPS loss of $0.04 per share.
Excluding this non-cash tax expense and also excluding a non-cash intangible asset abandonment charge, our Q4 non-GAAP adjusted EPS was $0.13, which we feel really good about. You may have noticed in our shareholder letter that we are giving two non-GAAP EPS figures. This is because, for the first time, we're excluding stock-based compensation expenses from income and plan to do so going forward. Excluding stock comp, our non-GAAP EPS was $0.18 in Q4.
As you can see in our reconciliation tables, this is up from non-GAAP EPS of $0.15 in the same period a year ago. To be clear, the $0.13 non-GAAP EPS is what compares to consensus, and the $0.18 non-GAAP EPS reflects a new adjustment that we're introducing this quarter. You have the tables in front of you, so I don't need to hit every number, but I do want to take a few moments to unpack gross margin and operating margin. Our consolidated gross margins were great this quarter, coming in at 66.6%. This reflected strong pricing, lower data migration costs than in previous quarters, and a favorable mix. We're proud of this result, but we also believe that we had a favorable confluence of factors in Q4 that boosted our gross margin.
We believe that 300 to 400 basis points of the gross margin performance was non-recurring. Drilling into gross margins a little bit more, you'll notice that software and sensors product gross margin flipped from -5% in Q3 to +43% in Q4. This was mostly tied to strength in pricing, as well as the timing of shipments and favorable product mix. With all the puts and takes of the past few quarters behind us, we expect software and sensors product gross margins to normalize to about 25%, excluding Axon Fleet pass-through hardware. On operating expenses, I want to take a minute and commend our team for working hard to implement and embrace robust cost controls in November and December. We've already started to see the results of their efforts as we started to bend the trajectory of our cost growth curve.
Our Q4 operating expenses of $55.4 million include $900,000 in restructuring costs associated with a reduction in force. We believe that this reduction in force will lead to $4.5 million in annual cost savings starting this year, 2018. Q4 operating expenses also included a $1.1 million non-cash charge related to an intangible asset write-down. You can also see the results of our cost controls on the adjusted EBITDA line, which came in at $15 million in Q4. This compares to $13 million a year ago and is up substantially from $7 million in Q3. Turning to the balance sheet, we feel really good about our financial condition with over $80 million of cash. We told you two quarters ago that we would take inventory levels to sub $50 million by the end of the year, and we did exactly that. Inventory was $45.5 million at year-end.
Before going over our guidance, I'll briefly discuss ASC 606. The new accounting standard is applicable to Axon effective January 1st, 2018. This standard effectively eliminates the concept of contingent revenue, which will result in accelerating some of our revenue recognition on new contracts, while at the same time moving previously stored up deferred revenue straight to the retained earnings line. We're still working through the details, but our accounting team has worked hard to prepare for the accounting change, and in 2018, we will disclose revenue results under both ASC 605 and 606, starting with our Q1 2018 results. Now to our 2018 outlook. We are providing the following guidance: revenue growth of 16%-18%, operating margin expansion of 300-400 basis points driven by strong gross margins and strict expense control.
Finally, capital expenditures of $12 million-$16 million. Looking a little further ahead, we're in the initial planning stages for a next-generation manufacturing facility and headquarters building that will consolidate our four Scottsdale locations into one complex. This is a long-range project that would see us break ground sometime in 2019 with a target completion date of 2021. The expected return on investment for this project is compelling, as it would enable us to retool our Scottsdale manufacturing lines, consolidate office space, and ultimately move our Axon Accelerate user conference onto our own campus. We'll have more to say on this as we move through the planning stages.
We appreciate your time today and will now be happy to take your questions. Operator, we're ready to move to Q&A.
Thank you. Ladies and gentlemen, at this time, if you have a question, please press the star then the number 1 key on your touchtone telephone. If your question has been answered or you wish to remove yourself from the queue, you may press the pound key. To prevent any background noise, we ask that you please place your line on mute once your question has been stated. Our first question comes from the line of Steve Dyer from Craig-Hallum. Your line is now open.
Thanks. Good afternoon. Nice quarter, guys.
Thank you.
Thanks, Steve.
As you dig in, I guess a little bit to the margins in the software and segments area, within hardware, I'm wondering, Jawad, if you could be a little more specific around kind of the puts and takes that kind of drove that outperformance. On the software or on the services side of it, gross margin was down year-over-year, which seemed a little surprising given the bigger base. Maybe just a little more detail on the puts and takes there.
Yeah, sure. Let's start with the first part of your question there. We saw some upside relative to product mix, and really we had the heavier portion of software versus hardware in the quarter. We generally, when that happens, we tend to see favorable margins. We also had some upside from adjustments we made to inventory that came in at the end of the year as part of our inventory balance. The second part of your question?
Yeah, just the lower recurring margins in the quarter, just on the higher revenue base.
Yeah. Could you clarify please, Steve?
Yeah. Just as I read through it quickly, it looked like the recurring gross margins were lower year-over-year. We can take it offline if you want to. I can look up the specific numbers. I guess I'll just move on quickly. Your operating margin as reported was 3.8% in 2017. Is that kind of the bogey that the 300 to 400 basis points of improvement is based on, or is there something that needs to be backed out of there?
Yes, that's correct. That is what it's based on. Sorry, Steve, I understand your other question now. We still had some data migration costs in Q4-
Okay.
That was a bit of a headwind, and then we do have some storage costs, and that'll continue to be in our financial profile going forward. The migration-
Got it.
is complete, but we do have storage costs.
Okay. Tax rate, 20%-25%, is that also kind of the right way to think about the cash tax rate?
Yes.
Okay, great. Thanks, guys.
Thank you. Our next question comes from the line of Mark Strouse from JPMorgan. Your line is now open.
Yeah. Hey, guys. Thanks for taking our questions, and I'll add my congrats as well. Rick, just wanted to start with the weapons order that came out, whenever that was, a week or two ago. We were encouraged to see the NYPD included in there with a fairly large order. I know you won't discuss any agencies specifically, but just generally speaking, is there anything incremental that you're seeing regarding some of the larger agencies that makes you a bit more optimistic that relatively lower penetration can increase?
I think we are continuing to see, as of, I would say, a few years ago, predominantly the larger agencies were sharing TASER weapons. I think we're now seeing that shift to where the larger agencies, starting with LAPD a few years ago, with Chicago and others moving towards individual issue of the TASER weapons. I think we're seeing in New York, obviously, a continued expansion there. I'm a little bit biased on this topic, but I believe every police officer who goes out with a gun should have a TASER, and I think that is starting to become a more mainstream view of the world. In Ferguson, Missouri, that officer did not have a TASER, and the consequences were catastrophic.
While we can't necessarily stop every tragedy from happening, we think we can have a big positive impact, and that's no longer seen as sort of a futurist view. I think that's becoming the present.
Yeah, Mark, this is Luke here. We're actually in San Francisco doing the call today. I might add that in November of last year, November 2017, San Francisco voted to approve TASERs for the PD. That's going to be a process that they have to work with to go through the actual procurement, but they approved it. We were actually out on a walk here around the block, and we saw the officers wearing the body cameras. We're really optimistic every police officer in the country will carry a TASER weapon, wear a body camera, and have a seat on the Axon network.
Okay, thank you. Can you just talk about, for the remainder of 2018, how we should think about uses of cash as far as M&A opportunities? Are there any kind of holes in your product portfolio or any just acquiring R&D, if you will, that you see that are out there that are compelling? Maybe an add-on to that, if there's anything new and different that you're seeing from competitors that might drive you towards one particular offering?
Got it. Great question. I'll take that one. We recently announced the team that we hired in Tampere, Finland. I was just on a conference call getting them started this week, and boy, really exciting and energetic to have some really great talent around imaging, that I think will help take up our hardware game and sort of increase our hardware's capabilities to drive future software capabilities. We continue to be, I'd say, mostly interested in finding great teams that we can acquire. I don't know that there's any glaring holes in the product ecosystem. I would tell you, I generally tend to be a skeptic on acquisitions.
I'm a Chicago School guy, that if we're going to look at an acquisition, it's going to have to pass a pretty high bar that it is more valuable because it's part of us than it would be a standalone or part of someone else. Our general strategy is not to go through acquisitions unless they either have a team that we really think accelerates us or some other unique sense of value that is unlocked by being part of us.
Okay, that's helpful. Thank you very much.
Thank you.
Thank you. Our next question comes from the line of Jeremy Hamblin from Dougherty & Company. Your line is now open.
I'll add my congratulations. I wanted to ask, going back to your November Analyst Day, you noted a couple of things. One, it sounds like you're realizing maybe some of the cost savings a little quicker than expected. I think that you've implemented some incentive changes for your sales team as well, to focus on selling contracts at better margins, or better payouts for lower discounts, so to speak. Tying those two things together, first, how has the change in incentive plans been received for the sales team? Then secondly, you noted previously that you expected the Axon or the software and sensor side of your platform to achieve profitability in two years, in 2020. Is that still kind of the track that you're expecting today?
Why don't I take the first part of that question, then I'll hand it over to Jawad here. On the cost savings, we've just been delighted that the company has really embraced a new value that we're calling Be Scrappy. I hosted an exec dinner, had the entire executive team, the 10-person team. We ate pizza. It was $100, and I paid for it out of my own pocket. We're feeling really good about the Be Scrappy initiative. On how we incentivize our sales team, we have really focused on segmenting that team into hunters and farmers. Their main incentive is to close business. We've put in some structures that we think will help facilitate lower discounts, but we're still really incentivizing them to go out and win new business, get full penetration, and add our additional tiers profitably.
Let me turn it over to Jawad on kind of the two to three-year outlook.
Yeah, I would add that I've also been pleasantly surprised with just how well the cost controls and the discipline has been adopted within the company. I would say we're sticking to the guidance that we gave. At this point, we're not bringing anything up. We still feel good about the three-year plan that we've communicated and that we've signed up for. There are lots of things that we want to do as far as investing in products. So the roadmap that we've got, we're going to continue to execute on that. I would say at this point, we're still on track with the guidance that we gave in November.
Great. If I could sneak one more in quick here. On the 16%-18% sales growth for the year, on the weapons side, are you expecting kind of similar, like 10% growth on that? Can you give us a little color on the weapons business outlook for 2018?
Yeah, I'd say we would expect certainly more of the growth to come from software and sensors. We feel great about our opportunities internationally on the weapons side. So I think what you're going to continue to see is a mature business domestically for weapons, lots of great opportunities internationally. There is a bit of lumpiness given the sales cycle, and we've talked about that in the past. Then really, the main growth engine for us will continue to be software and service sensors.
Just confirming, you are expecting a little bit of growth on the weapons side this year?
Correct.
Great. Thanks so much for taking the questions, guys.
Thank you. Our next question comes from the line of George Godfrey from C.L. King. Your line is now open.
Thank you. I'll add my congratulations. Very nice job. Two questions. One is, you mentioned winning some competitive win backs. Was that this quarter? Can you tell us what cities those were?
Yeah. The ones we were referring were this quarter. I don't know that we've disclosed exactly which cities those are.
I want to pay particular attention to the operating margin expansion. Thank you for that clarity. Just to be crystal clear, because margins are always such an issue, if I go to the midpoint, the 350 basis point improvement, is that inclusive of Axon Fleet or new product introductions in the year such that when it's all said and done, you're targeting a 7.3%, or is there going to be adjustments for new product initiatives? I heard Jawad mention the software and sensors normalizing around 25%, excluding the Axon Fleet pass-through hardware.
Yeah. Great question. No adjustments. That is what we're targeting for bottom line.
Great. Thank you very much.
Thank you. Our next question comes from the line of Allen Klee from Sidoti & Company. Your line is now open.
Yes. Hi. You provided, for your adjusted income, some tax-affected adjustments. What tax rate were you using for that, and what would you expect to be using going forward?
We have taxed in multiple jurisdictions. For that particular adjustment, we used our U.S. tax rate. It was impacted that we had a tax structure in the Netherlands that we wound down, and there was some residual effects of that in Q4 that were in our tax rate.
Okay.
In the U.S., just to be clear, it's about 37%.
For 2018, when you provide these numbers, will it be similar, or will it be a lower number?
It'll be lower. The U.S., obviously, we're going to see a lower income tax rate in the U.S. in 2018. Some of the items that helped our tax rate in 2017, we do expect some subset of those to continue in 2018. We had an R&D credit. Obviously, you've seen the impact from the accounting change relative to equity, and so we expect that to continue to help our tax rate. There is some volatility there. We can't really obviously predict the stock price at the extent that that fluctuates, and that'll drive some volatility in our tax rate as well.
Thank you. For Mr. Smith, you provided some I missed it, but some of the longer-term targets to hit his new payment plan, can you just repeat them?
I'm sorry, are you looking for specificity around the milestones themselves?
Yeah.
Sure. What we're effectively doing are, Rick needs to achieve 12 tranches, and they're not time-based, they're market cap-based or milestone-based. There are two sets of milestones. The first one is market cap, and those are in successive increments of $1 billion, from $2.5 billion-$13.5 billion. The second set of milestones are operational milestones, and there are eight revenue and eight EBITDA milestones. 16 total. Any 12 of those needs to be achieved. They get effectively tied into one market cap milestone. To basically achieve the full award, we would basically need to be a $13.5 billion market cap company and achieve 12 of the 16 operational targets. Those targets we included in our press release, but effectively, they start at $700 million of revenue, $125 million of EBITDA.
The highest revenue milestone is $2 billion, the highest EBITDA milestone is $230 million. Really, I would think about those separately. We structured the revenue milestones independent of the EBITDA milestones, because they weren't really meant to be looked at together.
Okay, thank you.
Thank you. Our next question comes from the line of Glenn Mattson from Ladenburg Thalmann. Your line is now open.
Hi, thanks for taking my questions. Jawad, I believe you had brought in some outside consultants to help you reorganize the operations and things. Is that work complete now, or is there still some more work to be done there?
Yeah, that work is still continuing in Q1. We're expecting to see there's an expense to that. Actually, it'll likely continue into a portion of Q2. There's a lot going on right now. I'd say we brought those folks in, but the bulk of the work has been done by the new team that we've got in place. I'm very excited about the team that we have in place now, led by Jim Zito, our VP of Accounting. We've brought in some great leadership under Jim, and in conjunction with the consultants, we've put in a new system to automate our revenue recognition. We're implementing a new HRIS, we're implementing a new ERP, or migrating over to the cloud-based version of our ERP. There's a lot of work going on. The consultants are one part of that.
Okay. Thanks. That's helpful. Curious on the video hardware gross margins. I think you say mix is the reason for the outperformance, but I guess maybe it's the mix of Flex versus Body, but I thought the docking stations also carried very high margins. I know they were down year-over-year. Can you help me get my hands around that a little better?
Yeah, the hardware that we shipped was at a significantly better margin than what we've seen in prior quarters.
A large part of that was the international beachhead account that accounted for thousands of cameras the prior quarter. There was a little bit of an adjustment that the inventory was favorable.
Yeah, that's right.
Okay. Shifting one other question on the RMS launch. When you start landing accounts with that product, is there a professional services component where you need to have a implementation process to help people port over from their old system to a new, or is it more seamless than that?
No, for sure there will be professional services components. We've been building out that team, which also, when you install things like Axon Fleet, working with agencies to be doing integrations in their vehicles also requires professional services. Fleet has been a nice chance to cut our teeth at that. Then, those don't all have to be employees. We can achieve that through partnerships as well as company-based employees.
Okay, great. Thanks for taking my questions.
Thank you.
Thank you. We have a follow-up question from the line of Jeremy Hamblin from Dougherty & Company. Your line is now open.
Thank you. Just a quick one here on more current trends. I think with the very sizable order that was received, kind of a lot of nuance behind the shipment timing on that. Can you give us a sense for, typically you might provide a little color on where the quarter is tracking or how we should be thinking about kind of the current quarter sales. Do you want to provide any color on that?
We feel good about this current quarter. We don't normally give quarter-to-quarter detailed guidance. We believe we've got strong momentum thus far.
Okay. I'll stick with that, thanks so much. Good luck, guys.
Thanks.
Thanks, Jeremy.
Thank you. As a reminder, if you would like to ask a question at this time, please press star then one. We have a follow-up from the line of Steve Dyer from Craig-Hallum. Your line is now open.
Yeah, that was just going to kind of be mine as well. Typically, I think you give commentary around at least directionally. I know Q1 is usually down five%-10% from Q4, but it sounds like maybe this year's Q1 will be a little bit stronger than it typically is. I mean, directionally, should we think about it being down, more flattish this year, and then build from there?
Yeah, Steve, I certainly appreciate the question. Last year, one of the dynamics that was a little challenging for us was giving the guidance quarterly as far as revenue and OpEx. What we'd like to do is guide to the annual guidance 16%-18% on the top line growth, 300-400 basis points on operating margin expansion. I would continue to expect to see some fluctuations quarter to quarter, but for the full year, that's what we expect to deliver.
Got it. As it relates to guidance, is the intention to update that as needed quarterly or biannually, or just see how it goes?
Yeah. Every quarter, we'll give you an update on how we're tracking for the full year.
All right. Got it. Thanks, guys.
Thank you. I'm showing no further questions over the phone lines at this time. I'd like to turn the call back over to management for closing remarks.
Great. To our shareholders, thanks for joining us today. Obviously, we're pretty proud of the results the team's turned in, proud of the team we've been building. I was in our Seattle office just yesterday meeting with some of our new employees and just continue to be dumbfounded at the level of talent that this organization has attracted. We just couldn't be more excited to continue to grow and improve. To our finance team who's listening today, you guys are doing a great job. I do want to talk a little about Jim, and we've got Andrea in the room here with us and a whole bunch of new folks that are really making Axon, setting the foundation for the next 10 years of growth. Obviously, I'm excited about this new compensation plan that we've put in place. I'm excited.
I know what I'm going to be doing for the next 10 years, and it's going to be a lot of fun working with great people doing great things. Stick around for the ride, and we'll talk to you guys in a few months for our next call. We'll see you at our shareholder meeting in May. With that, have a great day.
Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program, and you may now disconnect. Everyone, have a great day.