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 – 14.43% × 1,607,800 = 94,139
The financial performance from 2018 to 2022 demonstrates a transition from consistent economic value destruction to significant value creation. For the majority of the period, the organization operated with a negative economic profit, indicating that the returns generated from operations were insufficient to cover the cost of the capital employed. This trend culminated in a substantial deficit in 2021 before a sharp reversal in 2022.
- Net Operating Profit After Taxes (NOPAT) Trends
- NOPAT exhibited significant volatility between 2018 and 2021, with values fluctuating between 17.8 million and 78.1 million US dollars. However, 2022 marked a transformative shift, with NOPAT increasing to 326.2 million US dollars. This represents an approximately 744% increase over the previous year, signaling a dramatic improvement in operational efficiency and profitability.
- Invested Capital and Capital Cost Analysis
- Invested capital showed an aggressive growth trajectory, rising from 631.7 million US dollars in 2018 to 1.6 billion US dollars by 2022. This expansion was particularly pronounced between 2020 and 2022. Meanwhile, the cost of capital remained remarkably stable, hovering around 15% for four years before slightly decreasing to 14.43% in 2022. The steady cost of capital implies that the increasing economic losses prior to 2022 were driven by the pace of capital investment outpacing operational returns.
- Economic Profit and Value Creation
- Economic profit remained negative from 2018 through 2021, reaching its lowest point in 2021 with a loss of 151.8 million US dollars. This period of value destruction was characterized by a widening gap between the capital charge and the operating profit. The trend reversed decisively in 2022, when the company achieved a positive economic profit of 94.1 million US dollars. This shift indicates that the company has finally reached a scale where its operating returns exceed the required return on its invested capital base.
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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).
The financial results from 2018 to 2022 reveal a period of high volatility in net earnings contrasted with a resilient and eventually surging operational profitability. While the bottom line experienced significant fluctuations, including two years of net losses, the core operating performance remained positive and grew substantially by the end of the period.
- Net Operating Profit After Taxes (NOPAT) Trajectory
- NOPAT exhibited a non-linear but upward long-term trend. After an initial decline from US$ 78.1 million in 2018 to US$ 17.9 million in 2019, the metric recovered to US$ 51.8 million in 2020 and moderated to US$ 38.5 million in 2021. A significant acceleration occurred in 2022, with NOPAT increasing to US$ 326.2 million, indicating a substantial expansion in the company's ability to generate operating profit after tax.
- Net Income Volatility
- Net income demonstrated extreme variance over the five-year period. A positive result of US$ 29.2 million in 2018 declined sharply to US$ 882 thousand in 2019, followed by a transition into net losses in 2020 (US$ -1.7 million) and 2021 (US$ -60.0 million). This trend reversed abruptly in 2022, with net income rising to US$ 147.1 million.
- Analysis of Operating vs. Net Performance
- A distinct divergence is observable between 2020 and 2021, where NOPAT remained consistently positive despite the reporting of net losses. This suggests that the company's core operations continued to be profitable and capable of covering operating taxes, while the net losses were likely driven by non-operating items, such as interest expenses, asset impairments, or other non-cash charges. The simultaneous spike in both NOPAT and net income in 2022 indicates a strong alignment between operational success and overall bottom-line profitability.
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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).
The financial results from 2018 to 2022 reveal significant volatility in tax-related figures, characterized by a marked divergence between accrual-based income tax provisions and actual cash operating tax outflows.
- Provision for Income Taxes
- The provision for income taxes exhibits extreme instability, fluctuating between tax benefits and expenses. After alternating between a benefit in 2018 and an expense in 2019, a substantial tax benefit of $81.36 million was recorded in 2021. This trend reversed sharply in 2022, when the provision transitioned to a significant expense of $49.38 million.
- Cash Operating Taxes
- Cash operating taxes demonstrated a consistent growth trend from 2018 through 2020, rising from $7.67 million to $12.03 million. This upward trajectory was interrupted in 2021 by a negative value of $851 thousand, indicating a cash recovery or tax refund. However, 2022 saw a steep increase to $27.89 million, the highest cash tax payment within the observed timeframe.
- Analysis of Accrual versus Cash Divergence
- A profound disconnect is observed between accounting provisions and cash outflows, most notably in 2021. During this period, the accounting provision reflected a benefit of $81.36 million, while the cash impact was limited to a refund of only $851 thousand. This suggests that the majority of the tax benefits recognized in the financial statements were non-cash items. For the purposes of Economic Value Added (EVA), the reliance on cash operating taxes provides a more accurate representation of the actual liquidity impact compared to the highly volatile accounting provisions.
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Invested Capital
Axon Enterprise Inc., invested capital calculation (financing approach)
US$ 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 analysis of the financial structure from 2018 to 2022 reveals a significant expansion in the total capital base, characterized by a shift in the composition of funding sources. Invested capital exhibited a general upward trajectory, growing from 631,660 thousand US dollars in 2018 to 1,607,800 thousand US dollars by the end of 2022, despite a temporary contraction observed in 2019.
- Invested Capital Trends
- A substantial increase in invested capital is evident, particularly between 2020 and 2022. After a decline to 500,291 thousand US dollars in 2019, the capital base expanded rapidly, nearly doubling by 2021 and continuing to climb in 2022. This suggests an intensified investment in the company's operational capacity or strategic acquisitions during this period.
- Stockholders' Equity Growth
- Stockholders' equity demonstrated consistent year-over-year growth throughout the five-year period. Equity rose from 467,324 thousand US dollars in 2018 to 1,268,491 thousand US dollars in 2022. A notable acceleration occurred in 2020, where equity increased by approximately 79%, indicating strong internal capital generation or external equity financing.
- Debt and Lease Obligations
- The debt profile remained relatively low and stable from 2018 through 2021, with total reported debt and leases fluctuating between 10,609 thousand and 26,979 thousand US dollars. However, a dramatic shift occurred in 2022, where debt surged to 717,467 thousand US dollars. This abrupt increase represents a fundamental change in the leverage ratio and indicates a transition toward a more debt-heavy capital structure to fund growth or strategic initiatives.
- Capital Composition Shift
- Between 2018 and 2021, invested capital was predominantly funded through equity. The 2022 fiscal year marks a pivot in this strategy, as the contribution of debt to the total invested capital became significantly more pronounced, accounting for a much larger proportion of the total funding compared to previous years.
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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 | × | 15.10% | = | 14.38% | ||
| 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 | 14.43% | ||||||||||
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 | × | 15.10% | = | 15.06% | ||
| 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 | 15.07% | ||||||||||
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 | × | 15.10% | = | 15.07% | ||
| 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 | 15.08% | ||||||||||
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 | × | 15.10% | = | 15.07% | ||
| 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 | 15.08% | ||||||||||
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 | × | 15.10% | = | 15.05% | ||
| 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 | 15.05% | ||||||||||
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 | 94,139) | (151,776) | (57,200) | (57,570) | (16,982) | |
| Invested capital2 | 1,607,800) | 1,262,920) | 722,746) | 500,291) | 631,660) | |
| Performance Ratio | ||||||
| Economic spread ratio3 | 5.86% | -12.02% | -7.91% | -11.51% | -2.69% | |
| Benchmarks | ||||||
| Economic Spread Ratio, Competitors4 | ||||||
| Boeing Co. | -20.44% | -19.05% | — | — | — | |
| Caterpillar Inc. | -6.34% | -5.74% | — | — | — | |
| Eaton Corp. plc | -9.74% | -9.35% | — | — | — | |
| GE Aerospace | -13.77% | -18.68% | — | — | — | |
| Honeywell International Inc. | -3.10% | -2.01% | — | — | — | |
| Lockheed Martin Corp. | 14.24% | 15.22% | — | — | — | |
| RTX Corp. | -4.74% | -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 × 94,139 ÷ 1,607,800 = 5.86%
4 Click competitor name to see calculations.
The financial performance from 2018 to 2022 indicates a transition from a prolonged period of value destruction to a state of positive economic value creation. For the majority of the observed timeframe, the organization operated with a negative economic profit, suggesting that returns were insufficient to cover the weighted average cost of capital. A significant reversal occurred in the final year, marking a fundamental shift in capital efficiency.
- Economic Profit Trends
- Economic profit remained negative from 2018 through 2021, with losses intensifying significantly in 2021, reaching a deficit of 151.78 million USD. This trajectory suggests a phase of heavy investment or operational scaling where the cost of capital exceeded the generated returns. In 2022, a sharp pivot is observed as economic profit transitioned to a positive 94.14 million USD, indicating that the entity began generating wealth above its required cost of capital.
- Invested Capital Expansion
- Invested capital exhibited a general upward trajectory, accelerating notably after 2019. From a low of 500.29 million USD in 2019, the capital base expanded to 1.61 billion USD by 2022. This sustained increase in invested capital occurred concurrently with the period of negative economic profit, reflecting an aggressive capital deployment strategy and growth phase prior to the achievement of positive economic returns.
- Economic Spread Ratio Performance
- The economic spread ratio remained negative for four consecutive years, fluctuating between -2.69% in 2018 and a low of -12.02% in 2021. This negative spread confirms that the return on invested capital was consistently below the cost of capital. The shift to a positive ratio of 5.86% in 2022 represents a critical inflection point, demonstrating that operational returns have surpassed the cost of the capital employed, resulting in a positive spread.
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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 | 94,139) | (151,776) | (57,200) | (57,570) | (16,982) | |
| 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 | 6.99% | -14.60% | -7.62% | -10.37% | -3.57% | |
| Benchmarks | ||||||
| Economic Profit Margin, Competitors3 | ||||||
| Boeing Co. | -15.61% | -15.13% | — | — | — | |
| Caterpillar Inc. | -6.14% | -6.62% | — | — | — | |
| Eaton Corp. plc | -14.45% | -14.04% | — | — | — | |
| GE Aerospace | -12.48% | -18.85% | — | — | — | |
| Honeywell International Inc. | -4.09% | -2.80% | — | — | — | |
| Lockheed Martin Corp. | 5.74% | 6.50% | — | — | — | |
| RTX Corp. | -7.77% | -7.30% | — | — | — | |
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 × 94,139 ÷ 1,346,663 = 6.99%
3 Click competitor name to see calculations.
The period between 2018 and 2022 is characterized by a consistent expansion in adjusted net sales juxtaposed with a volatile economic profit trajectory. While revenue grew steadily, the company operated at an economic loss for four consecutive years before achieving a positive turnaround in the final year of the analysis.
- Adjusted Net Sales Growth
- A sustained upward trend is observed in adjusted net sales, which increased from US$ 476,219 thousand in 2018 to US$ 1,346,663 thousand by 2022. This represents a substantial increase in scale, with the most significant nominal gains occurring between 2020 and 2022.
- Economic Profit Performance
- Economic profit remained negative from 2018 through 2021, indicating that the returns generated were insufficient to cover the cost of capital. The deficit widened progressively, reaching a peak loss of US$ 151,776 thousand in 2021. However, a sharp reversal occurred in 2022, with economic profit shifting to a positive US$ 94,139 thousand, signaling the commencement of economic value creation.
- Economic Profit Margin Analysis
- The economic profit margin mirrored the volatility of the absolute economic profit. The margin declined from -3.57% in 2018 to a low of -14.60% in 2021, suggesting that the cost of capital and operational inefficiencies grew faster than sales during the expansion phase. The transition to a positive margin of 6.99% in 2022 demonstrates a significant improvement in capital efficiency and operational profitability relative to the cost of capital.
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