Axon Enterprise Inc. (NASDAQ:AXON)

Net operating profit after taxes (NOPAT)

The NOPAT exhibits significant volatility over the observed periods. It starts at 78,057 thousand USD in 2018, dramatically decreases to 17,857 thousand USD in 2019, and then recovers to 51,762 thousand USD in 2020. A subsequent decline to 38,523 thousand USD is noted in 2021 before a substantial increase to 326,174 thousand USD in 2022. This pattern indicates fluctuating operational efficiency or market conditions, with a pronounced improvement in the most recent year.

Cost of capital

The cost of capital remains relatively stable across the periods, with minor fluctuations between 12.32% and 12.86%. The rate peaks slightly in 2019 and 2020 at 12.86%, then gradually declines to 12.32% by 2022. This stability suggests consistent financing costs, with a slight easing in the final year potentially lowering capital expenses.

Invested capital

Invested capital shows a general upward trend, beginning at 631,660 thousand USD in 2018 and dipping to 500,291 thousand USD in 2019. Thereafter, it increases substantially, reaching 722,746 thousand USD in 2020, 1,262,920 thousand USD in 2021, and further growing to 1,607,800 thousand USD in 2022. This suggests active capital deployment and expansion efforts, particularly marked from 2020 onward.

Economic profit

The economic profit remains negative and deteriorates initially, starting at -3,000 thousand USD in 2018, then worsening to -46,478 thousand USD in 2019, and -41,177 thousand USD in 2020. The decline intensifies in 2021 to -123,792 thousand USD. However, a significant positive turnaround occurs in 2022, with economic profit surging to 128,163 thousand USD. This reversal implies that the company transitioned from period of value destruction to value creation, possibly driven by improved operational performance or better capital efficiency in the latest year.

Net Income (Loss)

The company experienced significant fluctuations in net income over the analyzed period. Starting with a substantial net income of $29,205 thousand in 2018, there was a sharp decline to $882 thousand in 2019, followed by a transition into losses in 2020 and 2021, with amounts of -$1,724 thousand and -$60,018 thousand, respectively. In 2022, the company reversed this trend dramatically, recording a significant net income of $147,139 thousand. This volatility indicates periods of financial difficulty followed by a substantial recovery and profitability improvement in the most recent year.

Net Operating Profit After Taxes (NOPAT)

NOPAT demonstrated a somewhat different pattern, though it also showed variability. The value started at $78,057 thousand in 2018 and then decreased considerably to $17,857 thousand in 2019. In 2020, NOPAT increased to $51,762 thousand, suggesting operational profitability improvement despite the net loss reported that year. A decline occurred again in 2021 to $38,523 thousand; however, a substantial increase to $326,174 thousand was evident in 2022. This increase in 2022 indicates enhanced operational efficiency and profitability on an after-tax basis.

Overall Trends and Insights

The data reveal a period of instability between 2018 and 2021, characterized by fluctuating and often negative net income, contrasted with positive but volatile NOPAT values. The divergence between net income and NOPAT especially during 2020 and 2021 suggests that non-operating factors or extraordinary charges may have negatively impacted net income. The strong recovery in 2022 across both net income and NOPAT points to improved financial health, possibly driven by operational improvements or a favorable change in the cost or revenue structure. The considerable growth in 2022 in both metrics reflects a pivotal turnaround likely resulting from strategic adjustments or market conditions.

Provision for income taxes (income tax benefit)

Over the five-year period, the provision for income taxes exhibited significant volatility and fluctuation. Initially, there was a negative provision in 2018, indicating an income tax benefit of 1,101 thousand US dollars. This turned positive in 2019, reaching 1,188 thousand US dollars, followed by another shift back to a negative provision in 2020 at -4,567 thousand US dollars. The most pronounced change occurred in 2021 with a substantial negative provision amounting to -81,357 thousand US dollars, suggesting a major income tax benefit that year. However, in 2022, the provision reversed to a positive figure of 49,379 thousand US dollars.

Cash operating taxes

Cash operating taxes demonstrated a generally increasing trend over the analyzed period, with a pronounced exception in 2021. Starting at 7,666 thousand US dollars in 2018, the amount increased steadily to 9,266 thousand US dollars in 2019 and further to 12,034 thousand US dollars in 2020. In 2021, there was a sharp decline, with cash operating taxes reported as negative 851 thousand US dollars, indicating a cash inflow or refund situation. Subsequently, in 2022, the cash operating taxes surged significantly to 27,888 thousand US dollars, more than doubling the previous peak.

The financial data reveals several notable trends in the company's capital structure and financial positioning over the five-year period ending in 2022.

Total Reported Debt & Leases

There is a relatively stable and moderate level of debt from 2018 through 2021, fluctuating between approximately 10.6 million and 27 million USD. However, in 2022, this figure experiences a dramatic increase to over 717 million USD. This sharp rise indicates a significant change in the company's financing strategy or capital structure, suggesting either a substantial new borrowing, lease obligation, or financial arrangement undertaken in the latest period.

Stockholders’ Equity

Stockholders' equity shows steady growth throughout all years, moving from around 467 million USD in 2018 to approximately 1.27 billion USD in 2022. The increase suggests consistent retention of earnings or capital injections, strengthening the company's net worth and reflecting profitable operations or equity financing activities.

Invested Capital

Invested capital fluctuates during the initial years, decreasing from roughly 632 million USD in 2018 to 500 million USD in 2019, then rising again to 723 million USD in 2020. From 2020 onward, invested capital increases significantly, peaking at approximately 1.61 billion USD by the end of 2022. This upward trend illustrates increased capital employed in the business, likely fuelled by the substantial growth in reported debt and equity, indicating expanded operational scale or investment in long-term assets.

Overall, the data suggests a period of gradual growth and stability up to 2021, followed by a marked increase in financial leverage and total capital employed in 2022. The spike in reported debt and leases may raise considerations regarding risk and debt service capacity, while the ongoing growth in equity and invested capital reflects a larger asset base and potentially heightened business activities.

Economic Profit

The economic profit figures exhibit significant volatility over the five-year period. Initially, there was a negative value of -3,000 thousand US dollars in 2018, which sharply declined to -46,478 thousand in 2019. Although there was a slight improvement in 2020 to -41,177 thousand, the economic profit further deteriorated in 2021 reaching the lowest point at -123,792 thousand. Notably, in 2022, the company experienced a substantial positive turnaround, recording a positive economic profit of 128,163 thousand US dollars.

Invested Capital

The invested capital shows a consistent increasing trend throughout the examined period. Starting at 631,660 thousand US dollars in 2018, it decreased to 500,291 thousand in 2019, which is an anomaly compared to the overall trend. From 2019 onwards, the invested capital increased sharply, reaching 722,746 thousand in 2020 and continuing to grow significantly to 1,262,920 thousand in 2021 and 1,607,800 thousand in 2022. This suggests expanding asset or investment base over the stated years.

Economic Spread Ratio

The economic spread ratio remained negative from 2018 through 2021, indicating a lack of profitability relative to invested capital during these years. The ratio declined from -0.48% in 2018 to a minimum of -9.8% in 2021, demonstrating deteriorating economic efficiency. In 2022, this trend reversed significantly, with the ratio rising to a positive 7.97%, which aligns with the marked improvement in economic profit observed in the same year. This shift implies improved returns on invested capital after a prolonged period of negative spreads.

Adjusted Net Sales

Adjusted net sales exhibited a consistent and substantial upward trend over the reported periods. Starting at approximately 476 million US dollars in 2018, sales increased steadily each year, reaching more than 1.3 billion US dollars by the end of 2022. This indicates strong revenue growth, with a notable acceleration especially between 2019 and 2022.

Economic Profit

The economic profit showed persistent negative values from 2018 through 2021, with losses deepening significantly in 2019 and reaching a maximum deficit in 2021 at over 123 million US dollars. However, in 2022, there was a marked reversal to a positive economic profit of approximately 128 million US dollars, highlighting a considerable improvement in profitability during the last period.

Economic Profit Margin

The economic profit margin corresponded closely with the economic profit figures and reflected negative profitability for four consecutive years, from -0.63% in 2018 to a low of nearly -12% in 2021. The margin turned positive in 2022, reaching 9.52%, which signifies a significant improvement in the company’s efficiency and value creation relative to its sales by the final year.

Overall Analysis

The data reveals a company undergoing rapid growth in sales while initially struggling to convert these revenues into economic profit. The worsening losses until 2021 suggest challenges in cost management or investment returns despite sales growth. The sharp turnaround in 2022, both in economic profit and margin, indicates successful operational or strategic changes that substantially enhanced profitability and economic value generation.