Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Economic Profit
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 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
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
= – × =
- Net Operating Profit After Taxes (NOPAT)
- The NOPAT exhibited significant fluctuations over the analyzed periods. It started at 78,057 thousand USD in 2018, dropped sharply to 17,857 thousand USD in 2019, then gradually increased to 51,762 thousand USD in 2020. However, the figure declined to 38,523 thousand USD in 2021 before experiencing a substantial surge to 326,174 thousand USD in 2022. This indicates volatility in operational profitability, with a major improvement in 2022.
- Cost of Capital
- The cost of capital remained relatively stable throughout the periods, fluctuating narrowly from 12.85% in 2018 to 12.33% in 2022. A slight downward trend is observable, suggesting a marginal reduction in the company's required return on invested capital over time.
- Invested Capital
- There was a general upward trend in invested capital. After decreasing from 631,660 thousand USD in 2018 to 500,291 thousand USD in 2019, it increased substantially in the subsequent years, reaching 1,607,800 thousand USD by 2022. This reflects significant capital deployment and expansion efforts.
- Economic Profit
- Economic profit was negative from 2018 through 2021, illustrating a pattern of value destruction during those years. Specifically, it declined from -3,117 thousand USD in 2018 to a low of -124,025 thousand USD in 2021. In 2022, a reversal occurred, with economic profit rising sharply to a positive 127,880 thousand USD. This shift suggests improved efficiency in capital utilization and profitability beyond the cost of capital.
- Overall Insights
- The data reveals a period of operational and economic challenges between 2019 and 2021, marked by lower NOPAT and consistent negative economic profit despite increased invested capital. The dramatic improvements in 2022, with both NOPAT and economic profit rising substantially, point to successful strategic or operational changes that enhanced value creation. The modest decline in cost of capital also slightly improved the cost structure. Overall, the 2022 results indicate a strong recovery and improved return on capital invested.
Net Operating Profit after Taxes (NOPAT)
Axon Enterprise Inc., NOPAT calculation
US$ in thousands
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
= × =
7 2022 Calculation
Tax benefit of interest expense = Adjusted interest expense × Statutory income tax rate
= × 21.00% =
8 Addition of after taxes interest expense to net income (loss).
- 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 $326,174 thousand was evident in 2022. This increase in 2022 indicates enhanced operational efficiency and profitability on an after-tax basis.
- Overall Trends and Insights
- The data reveal a period of instability between 2018 and 2021, characterized by fluctuating and often negative net income, contrasted with positive but volatile NOPAT values. The divergence between net income and NOPAT especially during 2020 and 2021 suggests that non-operating factors or extraordinary charges may have negatively impacted net income. The strong recovery in 2022 across both net income and NOPAT points to improved financial health, possibly driven by operational improvements or a favorable change in the cost or revenue structure. The considerable growth in 2022 in both metrics reflects a pivotal turnaround likely resulting from strategic adjustments or market conditions.
Cash Operating Taxes
Axon Enterprise Inc., cash operating taxes calculation
US$ in thousands
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).
- 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.
Invested Capital
Axon Enterprise Inc., invested capital calculation (financing approach)
US$ in thousands
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.
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.
Cost of Capital
Axon Enterprise Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Convertible notes3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
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 »
Economic Spread Ratio
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 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 × ÷ =
4 Click competitor name to see calculations.
Over the analyzed period from 2018 to 2022, several key financial indicators exhibit significant fluctuations, reflecting changes in the company's economic performance and capital utilization.
- Economic Profit
- Economic profit demonstrated a consistently negative trend from 2018 through 2021, indicating the company was generating returns below the cost of capital during these years. The loss deepened sharply in 2019 and reached its peak negative value in 2021 at -124,025 thousand US dollars. However, there was a substantial reversal in 2022, with economic profit turning positive to 127,880 thousand US dollars, suggesting a significant improvement in the company's profitability relative to its capital costs.
- Invested Capital
- Invested capital exhibited a general upward trend over the period, rising from 631,660 thousand US dollars in 2018 to 1,607,800 thousand US dollars in 2022. Notably, there was a dip in 2019 to 500,291 thousand US dollars, followed by strong growth in subsequent years, especially between 2020 and 2022. This pattern suggests increasing investment in assets or business activities, particularly after 2019.
- Economic Spread Ratio
- The economic spread ratio, which measures the difference between return on invested capital and its cost, was negative throughout most of the period analyzed. The ratio deteriorated sharply in 2019 and 2021, hitting lows of -9.31% and -9.82% respectively, indicating considerable value destruction during those years. However, in 2022, the ratio improved markedly to a positive 7.95%, in line with the turnaround in economic profit, signaling that the company not only recovered but began generating returns exceeding its capital costs.
Overall, the financial data reveal that the company faced substantial challenges in creating economic value from 2018 to 2021, with both economic profit and spread ratios negative and worsening. Nevertheless, the significant improvement in 2022 points to a successful strategic or operational shift, resulting in enhanced profitability and better utilization of invested capital.
Economic Profit Margin
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 | ||||||
| Net sales | ||||||
| Add: Increase (decrease) in deferred revenue | ||||||
| Adjusted net sales | ||||||
| Performance Ratio | ||||||
| Economic profit margin2 | ||||||
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | ||||||
| Caterpillar Inc. | ||||||
| Eaton Corp. plc | ||||||
| GE Aerospace | ||||||
| Honeywell International Inc. | ||||||
| Lockheed Martin Corp. | ||||||
| RTX Corp. | ||||||
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 × ÷ =
3 Click competitor name to see calculations.
- Economic Profit
- The economic profit exhibited a significant decline from a slight negative value of -3,117 thousand US dollars in 2018 to a deep negative of -124,025 thousand US dollars by the end of 2021. However, in 2022, there was a substantial turnaround as the economic profit turned positive, reaching 127,880 thousand US dollars.
- Adjusted Net Sales
- Adjusted net sales showed a continuous and robust growth trend throughout the entire period. The sales increased steadily from 476,219 thousand US dollars in 2018 to 1,346,663 thousand US dollars in 2022, with notable acceleration between 2019 and 2022, particularly in 2021 and 2022.
- Economic Profit Margin
- The economic profit margin followed a similar trajectory to economic profit, starting negative at -0.65% in 2018 and declining further to -11.93% by 2021. Despite these negative margins, there was a significant positive shift in 2022, with the margin reaching 9.5%, indicating improved profitability and operational efficiency relative to sales.
- Summary of Trends and Insights
- The data reflects an initial period of challenges with negative economic profit and margins, despite steady growth in sales. The deepening losses from 2018 to 2021 suggest increasing costs or inefficiencies offsetting revenue gains. Nonetheless, 2022 marks a pivotal year where economic profit became positive along with a strong economic profit margin. This indicates a successful turnaround, likely due to improved cost management or enhanced revenue quality, translating revenue growth into sustainable profitability.