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.
Economic Profit
Axon Enterprise Inc., economic profit 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 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 – 14.47% × 1,607,800 = 93,515
The financial performance between 2018 and 2022 is characterized by a transition from value destruction to value creation. For the majority of the period, the entity failed to generate sufficient operating returns to cover its cost of capital, resulting in negative economic profit. However, a significant pivot occurred in 2022, marking a shift toward positive economic value added.
- Economic Profit Trends
- Economic profit remained negative from 2018 through 2021, with losses deepening significantly in 2021 to a low of -152,290 thousand US$. This indicates that during this four-year span, the net operating profit after taxes was insufficient to meet the required return on invested capital. A sharp reversal is observed in 2022, where economic profit turned positive at 93,515 thousand US$, signaling that the company began generating returns in excess of its cost of capital.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited significant volatility during the early part of the period, dropping from 78,057 thousand US$ in 2018 to 17,857 thousand US$ in 2019, followed by a fluctuating recovery through 2021. A substantial surge is evident in 2022, with NOPAT reaching 326,174 thousand US$. This exponential increase in operational profitability served as the primary catalyst for the shift into positive economic profit.
- Invested Capital Expansion
- A consistent upward trajectory in invested capital is observed starting in 2020. After a slight dip in 2019, invested capital rose from 500,291 thousand US$ to 1,607,800 thousand US$ by the end of 2022. The rapid expansion of the capital base between 2020 and 2022 suggests aggressive investment in growth or infrastructure, which initially contributed to the widening economic profit deficit in 2021 before yielding high returns in 2022.
- Cost of Capital Stability
- The cost of capital remained remarkably stable throughout the analyzed period, hovering around 15.1% from 2018 to 2021, before slightly declining to 14.47% in 2022. This stability implies that the fluctuations in economic profit were driven by operational efficiency and capital deployment strategies rather than changes in the weighted average cost of capital or external financing conditions.
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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
= 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).
- 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 $326,174 thousand was evident in 2022. This increase in 2022 indicates enhanced operational efficiency and profitability on an after-tax basis.
- Overall Trends and Insights
- The data reveal a period of instability between 2018 and 2021, characterized by fluctuating and often negative net income, contrasted with positive but volatile NOPAT values. The divergence between net income and NOPAT especially during 2020 and 2021 suggests that non-operating factors or extraordinary charges may have negatively impacted net income. The strong recovery in 2022 across both net income and NOPAT points to improved financial health, possibly driven by operational improvements or a favorable change in the cost or revenue structure. The considerable growth in 2022 in both metrics reflects a pivotal turnaround likely resulting from strategic adjustments or market conditions.
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Cash Operating Taxes
Axon Enterprise Inc., cash operating taxes calculation
US$ 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.
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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.
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Cost of Capital
Axon Enterprise Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | 14,595,033) | 14,595,033) | ÷ | 15,325,833) | = | 0.95 | 0.95 | × | 15.15% | = | 14.42% | ||
| 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 | 14.47% | ||||||||||
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 | 9,514,802) | 9,514,802) | ÷ | 9,541,781) | = | 1.00 | 1.00 | × | 15.15% | = | 15.10% | ||
| 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 | 15.11% | ||||||||||
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 | 10,555,589) | 10,555,589) | ÷ | 10,579,972) | = | 1.00 | 1.00 | × | 15.15% | = | 15.11% | ||
| 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 | 15.12% | ||||||||||
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 | 4,605,697) | 4,605,697) | ÷ | 4,616,306) | = | 1.00 | 1.00 | × | 15.15% | = | 15.11% | ||
| 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 | 15.12% | ||||||||||
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 | 3,264,443) | 3,264,443) | ÷ | 3,277,220) | = | 1.00 | 1.00 | × | 15.15% | = | 15.09% | ||
| 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 | 15.09% | ||||||||||
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 | 93,515) | (152,290) | (57,495) | (57,773) | (17,239) | |
| Invested capital2 | 1,607,800) | 1,262,920) | 722,746) | 500,291) | 631,660) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 5.82% | -12.06% | -7.96% | -11.55% | -2.73% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -20.50% | -19.10% | — | — | — | |
| Caterpillar Inc. | -6.43% | -5.84% | — | — | — | |
| Eaton Corp. plc | -9.82% | -9.42% | — | — | — | |
| GE Aerospace | -13.84% | -18.75% | — | — | — | |
| Honeywell International Inc. | -3.14% | -2.05% | — | — | — | |
| Lockheed Martin Corp. | 14.26% | 15.25% | — | — | — | |
| RTX Corp. | -4.73% | -4.20% | — | — | — | |
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 × 93,515 ÷ 1,607,800 = 5.82%
4 Click competitor name to see calculations.
The financial trajectory from 2018 to 2022 is characterized by a prolonged period of economic value destruction followed by a significant transition to positive value creation. For the majority of the analyzed period, the organization failed to generate returns exceeding its cost of capital, though a decisive reversal occurred in the final year.
- Economic Profit
- A consistent trend of negative economic profit was observed between 2018 and 2021. The economic loss expanded from -17.24 million US dollars in 2018 to a peak deficit of -152.29 million US dollars in 2021. This suggests that during this four-year window, the operational returns were insufficient to cover the implicit cost of the capital employed. However, a substantial turnaround occurred in 2022, with economic profit shifting to a positive 93.52 million US dollars, indicating that the company began creating genuine economic value.
- Invested Capital
- The capital base experienced significant expansion over the five-year period. After a slight contraction in 2019 to 500.29 million US dollars, invested capital grew aggressively, reaching 1.61 billion US dollars by December 31, 2022. This steady increase in invested capital suggests a period of intensive scaling or investment in assets to support future growth, which preceded the eventual shift toward positive economic profit.
- Economic Spread Ratio
- The economic spread ratio remained negative from 2018 through 2021, reflecting a persistent gap between the return on invested capital and the weighted average cost of capital. The ratio showed volatility, reaching its lowest point of -12.06% in 2021, coinciding with the highest recorded economic loss. The shift to a positive 5.82% in 2022 represents a critical inflection point, confirming that the return on capital has finally surpassed the cost of capital, thereby transitioning the entity from a value-destroying state to a value-creating one.
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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 | 93,515) | (152,290) | (57,495) | (57,773) | (17,239) | |
| 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 | 6.94% | -14.65% | -7.66% | -10.41% | -3.62% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -15.66% | -15.17% | — | — | — | |
| Caterpillar Inc. | -6.23% | -6.73% | — | — | — | |
| Eaton Corp. plc | -14.56% | -14.15% | — | — | — | |
| GE Aerospace | -12.55% | -18.93% | — | — | — | |
| Honeywell International Inc. | -4.15% | -2.87% | — | — | — | |
| Lockheed Martin Corp. | 5.75% | 6.51% | — | — | — | |
| RTX Corp. | -7.76% | -7.29% | — | — | — | |
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 × 93,515 ÷ 1,346,663 = 6.94%
3 Click competitor name to see calculations.
Between 2018 and 2022, a significant transition in economic value creation is observed. While the period was characterized by consistent revenue expansion, economic profit remained negative for the majority of the timeframe, indicating that returns did not exceed the cost of capital until a sharp reversal occurred in the final year of the period.
- Revenue Growth Trajectory
- Adjusted net sales exhibited an uninterrupted upward trend, increasing from 476,219 thousand US dollars in 2018 to 1,346,663 thousand US dollars in 2022. This represents a substantial expansion in operational scale, with sales nearly tripling over the five-year window.
- Economic Profit Performance
- Economic profit showed a period of increasing deficits, moving from -17,239 thousand US dollars in 2018 to a peak loss of -152,290 thousand US dollars in 2021. A pivotal shift occurred in 2022, where the figure pivoted to a positive 93,515 thousand US dollars, signaling the transition from economic value destruction to value creation.
- Economic Profit Margin Analysis
- The economic profit margin remained negative from 2018 through 2021, fluctuating between -3.62% and -14.65%. The margin reached its lowest point in 2021 at -14.65%, coinciding with the highest absolute economic loss. In 2022, the margin corrected sharply to 6.94%, demonstrating a rapid improvement in the efficiency of capital utilization relative to sales volume.
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