Segment Data

The Company is comprised of two reportable segments: the manufacture and sale of CEWs, batteries, accessories, extended warranties and other products and services (the “TASER Weapons” segment); and the software and sensors business, which includes the sale of devices, wearables, applications, cloud and mobile products (collectively, the “Software and Sensors” segment). Within the Software and Sensors segment, the Company specifies sales of products and services. Revenue from the Company's “products” in the Software and Sensors segment are generally sales of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors,and other products, and is sometimes referred to as Sensors and Other revenue. Revenue from the Company's “services” in the Software and Sensors segment comprise sales related to the Axon Cloud, which includes Evidence.com, cloud-based evidence management software revenue, other recurring cloud-hosted software revenue and related professional services, and is sometimes referred to as Axon Cloud revenue. Within the Software and Sensors segment, the Company includes only revenues and costs attributable to that segment which include: costs of sales for both products and services, direct labor, selling expenses for the sales team, product management and R&D for products included, or to be included, within the Software and Sensors segment. All other costs are included in the TASER Weapons segment. The Company’s Chief Executive Officer, who is the CODM, is not provided asset information by segment, and therefore, no asset information is provided.

Information relative to the Company’s reportable segments was as follows (in thousands):



	Three Months Ended June 30, 2018							Three Months Ended June 30, 2017 ⁽¹⁾
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Net sales from products ⁽²⁾	$	60,624	$	16,097		$	76,721	$	53,016	$	13,859		$	66,875
Net sales from services ⁽³⁾	—		22,505			22,505		—		12,768			12,768
Net sales	60,624		38,602			99,226		53,016		26,627			79,643
Cost of product sales	17,681		13,406			31,087		16,078		14,094			30,172
Cost of service sales	—		4,996			4,996		—		3,834			3,834
Cost of sales	17,681		18,402			36,083		16,078		17,928			34,006
Gross margin	42,943		20,200			63,143		36,938		8,699			45,637
Sales, general and administrative	21,920		17,423			39,343		17,492		14,332			31,824
Research and development	4,019		14,482			18,501		1,863		11,126			12,989
Income (loss) from operations	$	17,004	$	(11,705	)	$	5,299	$	17,583	$	(16,759	)	$	824



	Six Months Ended June 30, 2018							Six Months Ended June 30, 2017 ⁽¹⁾
	TASER Weapons		Software and Sensors			Total		TASER Weapons		Software and Sensors			Total
Net sales from products ⁽²⁾	$	124,148	$	33,547		$	157,695	$	110,687	$	23,679		$	134,366
Net sales from services ⁽³⁾	—		42,746			42,746		—		24,519			24,519
Net sales	124,148		76,293			200,441		110,687		48,198			158,885
Cost of product sales	38,224		25,297			63,521		34,104		23,140			57,244
Cost of service sales	—		9,316			9,316		—		7,334			7,334
Cost of sales	38,224		34,613			72,837		34,104		30,474			64,578
Gross margin	85,924		41,680			127,604		76,583		17,724			94,307
Sales, general and administrative	43,185		31,917			75,102		34,708		27,973			62,681
Research and development	6,979		26,641			33,620		4,075		21,377			25,452
Income (loss) from operations	$	35,760	$	(16,878	)	$	18,882	$	37,800	$	(31,626	)	$	6,174

⁽¹⁾ Amounts for the three and six months ended June 30, 2017 have not been adjusted under the modified retrospective method of adoption of Topic 606, and are presented consistent with the prior period amounts reported under ASC 605.

⁽²⁾ Software and Sensors “products” revenue consists of sales of sensors, including on-officer body cameras, Axon Fleet cameras, other hardware sensors, warranties on sensors, and other products, and is sometimes referred to as Sensors and Other revenue.

⁽³⁾Software and Sensors “services” revenue comprises sales related to the Axon Cloud, which includes Evidence.com, cloud-based evidence management software revenue, other recurring cloud-hosted software revenue and related professional services and is sometimes referred to as Axon Cloud revenue.