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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.

Economic Profit
Net Operating Profit after Taxes (NOPAT)
Cash Operating Taxes
Invested Capital
Cost of Capital
Economic Spread Ratio
Economic Profit Margin

Axon Enterprise Inc., economic profit calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net operating profit after taxes (NOPAT)¹	326,174)	38,523)	51,762)	17,857)	78,057)
Cost of capital²	11.35%	11.84%	11.84%	11.84%	11.82%
Invested capital³	1,607,800)	1,262,920)	722,746)	500,291)	631,660)

Economic profit⁴	143,751)	(110,971)	(33,836)	(41,397)	3,405)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ NOPAT. See details »

² Cost of capital. See details »

³ Invested capital. See details »

⁴ 2022 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= 326,174 – 11.35% × 1,607,800 = 143,751

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Item	Description	The company
Economic profit	Economic profit is a measure of corporate performance computed by taking the spread between the return on invested capital and the cost of capital, and multiplying by the invested capital.	Axon Enterprise Inc. economic profit decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Axon Enterprise Inc., NOPAT calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net income (loss)	147,139)	(60,018)	(1,724)	882)	29,205)
Deferred income tax expense (benefit)¹	22,090)	(80,345)	(16,417)	(7,989)	(8,749)
Increase (decrease) in allowance²	(27)	98)	538)	(315)	1,128)
Increase (decrease) in deferred revenue³	156,728)	176,131)	69,381)	24,367)	56,151)
Increase (decrease) in accrued warranty expense⁴	(2,011)	2,053)	(707)	578)	254)
Increase (decrease) in equity equivalents⁵	176,780)	97,937)	52,795)	16,641)	48,784)
Interest expense	488)	28)	55)	46)	86)
Interest expense, operating lease liability⁶	2,366)	737)	819)	377)	—)
Adjusted interest expense	2,854)	765)	874)	423)	86)
Tax benefit of interest expense⁷	(599)	(161)	(184)	(89)	(18)
Adjusted interest expense, after taxes⁸	2,255)	604)	691)	334)	68)
Net operating profit after taxes (NOPAT)	326,174)	38,523)	51,762)	17,857)	78,057)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Elimination of deferred tax expense. See details »

² Addition of increase (decrease) in allowance.

³ Addition of increase (decrease) in deferred revenue.

⁴ Addition of increase (decrease) in accrued warranty expense.

⁵ Addition of increase (decrease) in equity equivalents to net income (loss).

⁶ 2022 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= 43,500 × 5.44% = 2,366

⁷ 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= 2,854 × 21.00% = 599

⁸ Addition of after taxes interest expense to net income (loss).

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Item	Description	The company
NOPAT	Net operating profit after taxes is income from operations, but after removement of taxes calculated on cash basis that are relevant to operating income.	Axon Enterprise Inc. NOPAT decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Axon Enterprise Inc., cash operating taxes calculation

US$ in thousands

12 months ended:	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Provision for income taxes (income tax benefit)	49,379)	(81,357)	(4,567)	1,188)	(1,101)
Less: Deferred income tax expense (benefit)	22,090)	(80,345)	(16,417)	(7,989)	(8,749)
Add: Tax savings from interest expense	599)	161)	184)	89)	18)
Cash operating taxes	27,888)	(851)	12,034)	9,266)	7,666)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

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Item	Description	The company
Cash operating taxes	Cash operating taxes are estimated by adjusting income tax expense for changes in deferred taxes and tax benefit from the interest deduction.	Axon Enterprise Inc. cash operating taxes decreased from 2020 to 2021 but then increased from 2021 to 2022 exceeding 2020 level.

Axon Enterprise Inc., invested capital calculation (financing approach)

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Convertible notes, net	673,967)	—)	—)	—)	—)
Operating lease liability¹	43,500)	26,979)	24,383)	10,609)	12,777)
Total reported debt & leases	717,467)	26,979)	24,383)	10,609)	12,777)
Stockholders’ equity	1,268,491)	1,047,849)	976,255)	543,495)	467,324)
Net deferred tax (assets) liabilities²	(156,865)	(126,382)	(45,121)	(27,334)	(19,347)
Allowance³	2,176)	2,203)	2,105)	1,567)	1,882)
Deferred revenue⁴	608,040)	451,312)	275,181)	205,800)	181,433)
Accrued warranty expense⁵	811)	2,822)	769)	1,476)	898)
Equity equivalents⁶	454,162)	329,955)	232,934)	181,509)	164,866)
Accumulated other comprehensive (income) loss, net of tax⁷	7,179)	1,317)	(141)	1,096)	1,513)
Adjusted stockholders’ equity	1,729,832)	1,379,121)	1,209,048)	726,100)	633,703)
Construction-in-process⁸	(62,283)	(25,258)	(13,479)	(12,385)	(14,820)
Investments⁹	(777,216)	(117,922)	(497,206)	(224,033)	—)
Invested capital	1,607,800)	1,262,920)	722,746)	500,291)	631,660)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Addition of capitalized operating leases.

² Elimination of deferred taxes from assets and liabilities. See details »

³ Addition of allowance for doubtful accounts receivable.

⁴ Addition of deferred revenue.

⁵ Addition of accrued warranty expense.

⁶ Addition of equity equivalents to stockholders’ equity.

⁷ Removal of accumulated other comprehensive income.

⁸ Subtraction of construction-in-process.

⁹ Subtraction of investments.

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Item	Description	The company
Invested capital	Capital is an approximation of the economic book value of all cash invested in going-concern business activities.	Axon Enterprise Inc. invested capital increased from 2020 to 2021 and from 2021 to 2022.

Axon Enterprise Inc., cost of capital calculations

Dec 31, 2022

	Capital (fair value)¹	Weights					Cost of capital
Equity²	14,595,033)	14,595,033)	÷	15,325,833)	=	0.95	0.95	×	11.86%	=	11.30%
Convertible notes³	687,300)	687,300)	÷	15,325,833)	=	0.04	0.04	×	0.99% × (1 – 21.00%)	=	0.04%
Operating lease liability⁴	43,500)	43,500)	÷	15,325,833)	=	0.00	0.00	×	5.44% × (1 – 21.00%)	=	0.01%
Total:	15,325,833)					1.00					11.35%

Based on: 10-K (reporting date: 2022-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible notes. See details »

⁴ Operating lease liability. See details »

Dec 31, 2021

	Capital (fair value)¹	Weights					Cost of capital
Equity²	9,514,802)	9,514,802)	÷	9,541,781)	=	1.00	1.00	×	11.86%	=	11.83%
Convertible notes³	—)	—)	÷	9,541,781)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	26,979)	26,979)	÷	9,541,781)	=	0.00	0.00	×	2.73% × (1 – 21.00%)	=	0.01%
Total:	9,541,781)					1.00					11.84%

Based on: 10-K (reporting date: 2021-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible notes. See details »

⁴ Operating lease liability. See details »

Dec 31, 2020

	Capital (fair value)¹	Weights					Cost of capital
Equity²	10,555,589)	10,555,589)	÷	10,579,972)	=	1.00	1.00	×	11.86%	=	11.84%
Convertible notes³	—)	—)	÷	10,579,972)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	24,383)	24,383)	÷	10,579,972)	=	0.00	0.00	×	3.36% × (1 – 21.00%)	=	0.01%
Total:	10,579,972)					1.00					11.84%

Based on: 10-K (reporting date: 2020-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible notes. See details »

⁴ Operating lease liability. See details »

Dec 31, 2019

	Capital (fair value)¹	Weights					Cost of capital
Equity²	4,605,697)	4,605,697)	÷	4,616,306)	=	1.00	1.00	×	11.86%	=	11.84%
Convertible notes³	—)	—)	÷	4,616,306)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	10,609)	10,609)	÷	4,616,306)	=	0.00	0.00	×	3.55% × (1 – 21.00%)	=	0.01%
Total:	4,616,306)					1.00					11.84%

Based on: 10-K (reporting date: 2019-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible notes. See details »

⁴ Operating lease liability. See details »

Dec 31, 2018

	Capital (fair value)¹	Weights					Cost of capital
Equity²	3,264,443)	3,264,443)	÷	3,277,220)	=	1.00	1.00	×	11.86%	=	11.82%
Convertible notes³	—)	—)	÷	3,277,220)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Operating lease liability⁴	12,777)	12,777)	÷	3,277,220)	=	0.00	0.00	×	0.00% × (1 – 21.00%)	=	0.00%
Total:	3,277,220)					1.00					11.82%

Based on: 10-K (reporting date: 2018-12-31).

¹ US$ in thousands

² Equity. See details »

³ Convertible notes. See details »

⁴ Operating lease liability. See details »

Axon Enterprise Inc., economic spread ratio calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	143,751)	(110,971)	(33,836)	(41,397)	3,405)
Invested capital²	1,607,800)	1,262,920)	722,746)	500,291)	631,660)
Performance Ratio
Economic spread ratio³	8.94%	-8.79%	-4.68%	-8.27%	0.54%
Benchmarks
Economic Spread Ratio, Competitors⁴
Boeing Co.	-19.79%	-18.46%	-30.02%	-19.89%	—
Caterpillar Inc.	1.04%	0.97%	-5.15%	1.17%	—
Cummins Inc.	-1.31%	2.63%	-0.70%	4.69%	—
Eaton Corp. plc	-4.59%	-4.37%	-6.48%	-3.80%	—
General Electric Co.	-8.83%	-13.82%	-3.96%	-6.51%	—
Honeywell International Inc.	-0.84%	0.21%	-1.22%	3.05%	—
Lockheed Martin Corp.	13.24%	14.23%	17.53%	18.15%	—
RTX Corp.	-3.18%	-2.71%	-8.23%	0.27%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² Invested capital. See details »

³ 2022 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × 143,751 ÷ 1,607,800 = 8.94%

⁴ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic spread ratio	The ratio of economic profit to invested capital, also equal to the difference between return on invested capital (ROIC) and cost of capital.	Axon Enterprise Inc. economic spread ratio deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Axon Enterprise Inc., economic profit margin calculation, comparison to benchmarks

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Selected Financial Data (US$ in thousands)
Economic profit¹	143,751)	(110,971)	(33,836)	(41,397)	3,405)

Net sales	1,189,935)	863,381)	681,003)	530,860)	420,068)
Add: Increase (decrease) in deferred revenue	156,728)	176,131)	69,381)	24,367)	56,151)
Adjusted net sales	1,346,663)	1,039,512)	750,384)	555,227)	476,219)
Performance Ratio
Economic profit margin²	10.67%	-10.68%	-4.51%	-7.46%	0.72%
Benchmarks
Economic Profit Margin, Competitors³
Boeing Co.	-15.11%	-14.64%	-24.59%	-9.23%	—
Caterpillar Inc.	1.01%	1.12%	-7.15%	1.27%	—
Cummins Inc.	-1.05%	1.90%	-0.61%	3.00%	—
Eaton Corp. plc	-6.80%	-6.56%	-9.95%	-5.24%	—
General Electric Co.	-8.01%	-13.95%	-6.33%	-9.68%	—
Honeywell International Inc.	-1.10%	0.30%	-1.81%	3.55%	—
Lockheed Martin Corp.	5.34%	6.07%	7.52%	7.79%	—
RTX Corp.	-5.37%	-4.82%	-16.81%	0.36%	—

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

¹ Economic profit. See details »

² 2022 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted net sales
= 100 × 143,751 ÷ 1,346,663 = 10.67%

³ Click competitor name to see calculations.

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Performance ratio	Description	The company
Economic profit margin	The ratio of economic profit to sales. It is the company profit margin covering income efficiency and asset management. Economic profit margin is not biased in favor of capital-intensive business models, because any added capital is a cost to the economic profit margin.	Axon Enterprise Inc. economic profit margin deteriorated from 2020 to 2021 but then improved from 2021 to 2022 exceeding 2020 level.

Axon Enterprise Inc. (NASDAQ:AXON)

Economic Value Added (EVA)

Economic Profit

Net Operating Profit after Taxes (NOPAT)

Cash Operating Taxes

Invested Capital

Cost of Capital

Economic Spread Ratio

Economic Profit Margin