Axon Enterprise Inc. (NASDAQ:AXON)

Net Operating Profit After Taxes (NOPAT)

The net operating profit after taxes exhibits significant variability across the five-year period. Starting at a high point of 78,057 thousand USD in 2018, there is a sharp decline in 2019 to 17,857 thousand USD. This is followed by a recovery phase in 2020, increasing to 51,762 thousand USD, before dropping again to 38,523 thousand USD in 2021. A substantial increase occurs in 2022, reaching 326,174 thousand USD, indicating a notable improvement in operational profitability in the most recent year.

Cost of Capital

The cost of capital remains relatively stable throughout the period, with slight fluctuations. It starts at 12.77% in 2018, marginally rising to 12.8% in 2019 and 2020, and then slightly decreasing to 12.79% in 2021 and 12.26% in 2022. This stability suggests consistent financing costs over time, with a minor reduction in 2022.

Invested Capital

Invested capital shows a generally increasing trend. From 631,660 thousand USD in 2018, it decreases to 500,291 thousand USD in 2019, followed by a considerable increase in 2020 to 722,746 thousand USD. There is a marked expansion in 2021, with invested capital rising to 1,262,920 thousand USD, and this upward movement continues in 2022, reaching 1,607,800 thousand USD. The overall trajectory points towards significant growth in resources deployed.

Economic Profit

Economic profit remains negative for the initial four years, indicating that the returns did not cover the cost of capital during that period. The loss widens from -2,627 thousand USD in 2018 to -46,182 thousand USD in 2019, and remains substantially negative through 2020 and 2021 at -40,749 thousand USD and -123,044 thousand USD, respectively. However, 2022 shows a dramatic turnaround with economic profit reaching 129,072 thousand USD, suggesting that the company was able to generate returns well in excess of its cost of capital 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 demonstrates significant volatility over the observed periods. Initially, it was negative at -2,627 thousand US$ in 2018 and deteriorated substantially in 2019 and 2020, recording -46,182 thousand US$ and -40,749 thousand US$ respectively. The decline continued sharply into 2021, reaching a low of -123,044 thousand US$. However, a notable turnaround occurred in 2022, with economic profit reversing to a positive 129,072 thousand US$, indicating a substantial improvement in economic value generated.

Invested Capital

The invested capital has shown a consistent upward trend throughout the analyzed timeframe. Starting at 631,660 thousand US$ in 2018, it decreased to 500,291 thousand US$ in 2019, likely due to divestments or asset sales. From 2019 onwards, the invested capital expanded significantly, reaching 722,746 thousand US$ in 2020, then growing markedly to 1,262,920 thousand US$ in 2021, and further increasing to 1,607,800 thousand US$ in 2022. This expansion may reflect increased investments or asset acquisitions supporting growth strategies.

Economic Spread Ratio

The economic spread ratio followed a pattern similar to economic profit, indicating initially negative returns relative to invested capital. In 2018, the ratio was marginally negative at -0.42%, worsening substantially in 2019 to -9.23%, and improving slightly in 2020 to -5.64%. In 2021, it declined again to -9.74%, reflecting inefficiencies or higher capital costs. A significant positive shift is observed in 2022, with the economic spread ratio increasing to 8.03%, suggesting the company successfully generated returns above its cost of capital during that year.

Adjusted net sales

The adjusted net sales demonstrate a consistent upward trend over the five-year period. Starting at $476,219 thousand in 2018, sales increased steadily each year, reaching $1,346,663 thousand by 2022. This represents nearly a threefold increase in sales, indicating strong revenue growth and expanding business activity.

Economic profit

The economic profit figures show significant volatility and notable changes. Initially, economic profit was negative at -$2,627 thousand in 2018, and it deteriorated sharply to -$46,182 thousand in 2019. Although there was a slight improvement in 2020 to -$40,749 thousand, economic profit declined again substantially to -$123,044 thousand in 2021. In 2022, however, the company experienced a marked turnaround with a positive economic profit of $129,072 thousand, indicating a significant shift from losses to profitability.

Economic profit margin

The economic profit margin closely mirrors the trend seen in economic profit. It started at a slightly negative margin of -0.55% in 2018, worsening considerably to -8.32% in 2019. Despite some improvement to -5.43% in 2020, the margin declined further to -11.84% in 2021. In 2022, the margin turned positive at 9.58%, reflecting enhanced profitability relative to sales volume and effective economic value generation during the most recent period.

Summary of financial trend insights

The data indicates robust revenue growth combined with initial challenges in achieving economic profitability from 2018 through 2021, as shown by negative economic profits and declining margins. The substantial improvement in 2022, with both economic profit and its margin becoming positive for the first time in the observed period, suggests that the company improved operational efficiency or capital deployment effectiveness. This turnaround may signify a substantive positive shift in financial performance, potentially driven by higher sales and better cost or capital management strategies.