Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Axon Enterprise Inc., solvency ratios
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 solvency profile indicates a strategic transition toward increased leverage in the most recent reporting period, accompanied by a significant recovery in the capacity to service financial obligations.
- Capital Structure and Leverage
- Between 2019 and 2021, the company maintained a conservative capital structure with negligible debt levels, as evidenced by debt-to-equity and debt-to-assets ratios remaining near zero. A marked shift occurred in 2022, where the debt-to-equity ratio rose to 0.57 and the debt-to-assets ratio increased to 0.25. This increase in borrowing is further reflected in the financial leverage ratio, which climbed to 2.25 in 2022 after fluctuating between 1.41 and 1.61 in the preceding years.
- Debt Servicing and Coverage Capacity
- Coverage ratios exhibited extreme volatility over the five-year period. Interest coverage declined from a high of 327.79 in 2018 to severe negative values in 2020 and 2021, reaching a low of -5,048.11. A robust recovery was recorded in 2022, with the ratio ascending to 403.70. Similarly, the fixed charge coverage ratio dropped from 7.56 in 2018 to -17.79 in 2021 before rebounding to 22.38 in 2022. This pattern suggests that the company experienced a period of significant earnings instability or operational losses mid-period, which was resolved by 2022, enabling the company to support a higher debt load.
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Debt to Equity
Axon Enterprise Inc., debt to equity 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Stockholders’ equity | 1,268,491) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Solvency Ratio | ||||||
| Debt to equity1 | 0.53 | 0.00 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Equity, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.33 | 2.29 | — | — | — | |
| Eaton Corp. plc | 0.51 | 0.52 | — | — | — | |
| GE Aerospace | 0.89 | 0.87 | — | — | — | |
| Honeywell International Inc. | 1.17 | 1.06 | — | — | — | |
| Lockheed Martin Corp. | 1.68 | 1.07 | — | — | — | |
| RTX Corp. | 0.44 | 0.43 | — | — | — | |
| Debt to Equity, Sector | ||||||
| Capital Goods | 1.33 | 1.26 | — | — | — | |
| Debt to Equity, Industry | ||||||
| Industrials | 1.42 | 1.37 | — | — | — | |
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 2022 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity
= 673,967 ÷ 1,268,491 = 0.53
2 Click competitor name to see calculations.
Stockholders' equity demonstrates a consistent and significant upward trajectory from 2018 through 2022. The equity base grew from 467,324 thousand US dollars in 2018 to 1,268,491 thousand US dollars by the end of 2022, representing a substantial expansion of the net asset value. A notable acceleration in growth occurred between 2019 and 2020, where equity nearly doubled, indicating a strong accumulation of capital or retained earnings during that period.
- Leverage Position
- As of December 31, 2022, total debt is reported at 673,967 thousand US dollars. The corresponding debt to equity ratio of 0.53 indicates that the company utilizes a moderate level of leverage, with total debt representing approximately 53% of the total stockholders' equity.
- Solvency Trend
- The steady increase in stockholders' equity over the five-year period suggests an improving solvency profile. The 2022 ratio indicates a balanced capital structure where equity remains the dominant source of financing, providing a significant cushion for creditors and reducing overall financial risk.
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Debt to Equity (including Operating Lease Liability)
Axon Enterprise Inc., debt to equity (including operating lease liability) 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Current operating lease liabilities (classified in Other current liabilities) | 6,357) | 6,540) | 5,431) | 3,817) | —) | |
| Long-term operating lease liabilities | 37,143) | 20,439) | 18,952) | 6,792) | —) | |
| Total debt (including operating lease liability) | 717,467) | 26,979) | 24,383) | 10,609) | —) | |
| Stockholders’ equity | 1,268,491) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Solvency Ratio | ||||||
| Debt to equity (including operating lease liability)1 | 0.57 | 0.03 | 0.02 | 0.02 | 0.00 | |
| Benchmarks | ||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 2.37 | 2.33 | — | — | — | |
| Eaton Corp. plc | 0.54 | 0.55 | — | — | — | |
| GE Aerospace | 0.96 | 0.94 | — | — | — | |
| Honeywell International Inc. | 1.23 | 1.11 | — | — | — | |
| Lockheed Martin Corp. | 1.81 | 1.19 | — | — | — | |
| RTX Corp. | 0.47 | 0.46 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 1.39 | 1.32 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | ||||||
| Industrials | 1.59 | 1.54 | — | — | — | |
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 2022 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity
= 717,467 ÷ 1,268,491 = 0.57
2 Click competitor name to see calculations.
The solvency profile reflects a period of extreme conservatism followed by a significant shift in leverage. From 2019 through 2021, the capital structure was characterized by minimal reliance on external debt, followed by a substantial increase in total liabilities in 2022.
- Debt to Equity Ratio Trend
- Between 2019 and 2021, the debt to equity ratio remained nearly stagnant, fluctuating between 0.02 and 0.03. This indicates a highly unleveraged position where equity overwhelmingly exceeded debt obligations. By the end of 2022, the ratio rose sharply to 0.57, signaling a transition toward a more leveraged balance sheet.
- Total Debt Analysis
- Total debt, including operating lease liabilities, experienced marginal growth between 2019 and 2021, increasing from US$ 10.6 million to US$ 27.0 million. A precipitous increase is observed in 2022, with total debt reaching US$ 717.5 million, representing a nearly 26-fold increase over the previous year's balance.
- Stockholders' Equity Performance
- Stockholders' equity exhibited a consistent and strong upward trajectory, rising from US$ 467.3 million in 2018 to US$ 1.27 billion in 2022. While equity grew by approximately 172% over the five-year period, the magnitude of debt accumulation in 2022 outpaced this growth, fundamentally altering the solvency ratio.
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Debt to Capital
Axon Enterprise Inc., debt to capital 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Stockholders’ equity | 1,268,491) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Total capital | 1,942,458) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Solvency Ratio | ||||||
| Debt to capital1 | 0.35 | 0.00 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Capital, Competitors2 | ||||||
| Boeing Co. | 1.39 | 1.35 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.34 | 0.34 | — | — | — | |
| GE Aerospace | 0.47 | 0.47 | — | — | — | |
| Honeywell International Inc. | 0.54 | 0.51 | — | — | — | |
| Lockheed Martin Corp. | 0.63 | 0.52 | — | — | — | |
| RTX Corp. | 0.31 | 0.30 | — | — | — | |
| Debt to Capital, Sector | ||||||
| Capital Goods | 0.57 | 0.56 | — | — | — | |
| Debt to Capital, Industry | ||||||
| Industrials | 0.59 | 0.58 | — | — | — | |
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 2022 Calculation
Debt to capital = Total debt ÷ Total capital
= 673,967 ÷ 1,942,458 = 0.35
2 Click competitor name to see calculations.
Total capital exhibits a consistent and significant upward trajectory over the five-year period ending December 31, 2022. Starting at 467,324 thousand US dollars in 2018, total capital grew to 1,942,458 thousand US dollars by 2022. The most pronounced increases occurred between 2019 and 2020, where capital nearly doubled, and between 2021 and 2022, where it increased by approximately 85%.
- Debt to Capital Ratio
- As of December 31, 2022, the debt to capital ratio is 0.35. This indicates that 35% of the total capital structure is composed of debt, while the remaining 65% is financed through equity. This ratio suggests a moderate level of leverage, maintaining a capital structure that is primarily equity-funded.
- Total Debt Trends
- While debt figures are not reported for the period between 2018 and 2021, the recorded total debt of 673,967 thousand US dollars in 2022 coincides with the highest recorded level of total capital. This suggests a strategic introduction or increase in debt financing to support the rapid expansion of the company's capital base.
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Debt to Capital (including Operating Lease Liability)
Axon Enterprise Inc., debt to capital (including operating lease liability) 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Current operating lease liabilities (classified in Other current liabilities) | 6,357) | 6,540) | 5,431) | 3,817) | —) | |
| Long-term operating lease liabilities | 37,143) | 20,439) | 18,952) | 6,792) | —) | |
| Total debt (including operating lease liability) | 717,467) | 26,979) | 24,383) | 10,609) | —) | |
| Stockholders’ equity | 1,268,491) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Total capital (including operating lease liability) | 1,985,958) | 1,074,828) | 1,000,638) | 554,104) | 467,324) | |
| Solvency Ratio | ||||||
| Debt to capital (including operating lease liability)1 | 0.36 | 0.03 | 0.02 | 0.02 | 0.00 | |
| Benchmarks | ||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 1.37 | 1.34 | — | — | — | |
| Caterpillar Inc. | 0.70 | 0.70 | — | — | — | |
| Eaton Corp. plc | 0.35 | 0.36 | — | — | — | |
| GE Aerospace | 0.49 | 0.49 | — | — | — | |
| Honeywell International Inc. | 0.55 | 0.53 | — | — | — | |
| Lockheed Martin Corp. | 0.64 | 0.54 | — | — | — | |
| RTX Corp. | 0.32 | 0.31 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.58 | 0.57 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.61 | 0.61 | — | — | — | |
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 2022 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 717,467 ÷ 1,985,958 = 0.36
2 Click competitor name to see calculations.
The company's solvency position underwent a significant transformation between 2019 and 2022, characterized by a transition from a nearly debt-free capital structure to a more leveraged financial position.
- Total Debt Trends
- Total debt, including operating lease liabilities, remained relatively low and stable from 2019 through 2021, moving from 10.61 million US dollars to 26.98 million US dollars. A substantial increase occurred in 2022, with debt rising to 717.47 million US dollars, representing a sharp escalation in borrowing levels.
- Total Capital Expansion
- The total capital base exhibited consistent growth over the analyzed period. Starting at 467.32 million US dollars in 2018, total capital increased to 1.99 billion US dollars by December 31, 2022. This steady expansion indicates a significant increase in the company's overall financial resources.
- Debt to Capital Ratio Interpretation
- The debt to capital ratio remained minimal and stable between 2019 and 2021, fluctuating slightly between 0.02 and 0.03. In 2022, the ratio rose sharply to 0.36. This indicates a fundamental shift in the financing strategy, as debt transitioned from a negligible component of the capital structure to a more significant driver of the company's funding.
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Debt to Assets
Axon Enterprise Inc., debt to assets 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Total assets | 2,851,894) | 1,688,210) | 1,381,023) | 845,639) | 719,540) | |
| Solvency Ratio | ||||||
| Debt to assets1 | 0.24 | 0.00 | 0.00 | 0.00 | 0.00 | |
| Benchmarks | ||||||
| Debt to Assets, Competitors2 | ||||||
| Boeing Co. | 0.42 | 0.42 | — | — | — | |
| Caterpillar Inc. | 0.45 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.25 | 0.25 | — | — | — | |
| GE Aerospace | 0.17 | 0.18 | — | — | — | |
| Honeywell International Inc. | 0.31 | 0.30 | — | — | — | |
| Lockheed Martin Corp. | 0.29 | 0.23 | — | — | — | |
| RTX Corp. | 0.20 | 0.20 | — | — | — | |
| Debt to Assets, Sector | ||||||
| Capital Goods | 0.28 | 0.28 | — | — | — | |
| Debt to Assets, Industry | ||||||
| Industrials | 0.31 | 0.30 | — | — | — | |
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 2022 Calculation
Debt to assets = Total debt ÷ Total assets
= 673,967 ÷ 2,851,894 = 0.24
2 Click competitor name to see calculations.
Total assets exhibit a consistent and significant upward trajectory from 2018 through 2022. The asset base expanded from 719,540 thousand US dollars in 2018 to 2,851,894 thousand US dollars by the end of 2022, reflecting a substantial increase in the overall scale of resources.
- Asset Growth Trends
- A sustained increase in total assets is observed throughout the reported period, with particularly sharp growth phases occurring between 2019 and 2020, as well as between 2021 and 2022.
- Solvency and Leverage Position
- For the period ending December 31, 2022, total debt is recorded at 673,967 thousand US dollars. This results in a debt-to-assets ratio of 0.24, implying that 24% of assets are funded via debt, which indicates a conservative approach to leverage and a strong solvency standing.
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Debt to Assets (including Operating Lease Liability)
Axon Enterprise Inc., debt to assets (including operating lease liability) 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) | ||||||
| Convertible notes, net | 673,967) | —) | —) | —) | —) | |
| Total debt | 673,967) | —) | —) | —) | —) | |
| Current operating lease liabilities (classified in Other current liabilities) | 6,357) | 6,540) | 5,431) | 3,817) | —) | |
| Long-term operating lease liabilities | 37,143) | 20,439) | 18,952) | 6,792) | —) | |
| Total debt (including operating lease liability) | 717,467) | 26,979) | 24,383) | 10,609) | —) | |
| Total assets | 2,851,894) | 1,688,210) | 1,381,023) | 845,639) | 719,540) | |
| Solvency Ratio | ||||||
| Debt to assets (including operating lease liability)1 | 0.25 | 0.02 | 0.02 | 0.01 | 0.00 | |
| Benchmarks | ||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | ||||||
| Boeing Co. | 0.43 | 0.43 | — | — | — | |
| Caterpillar Inc. | 0.46 | 0.46 | — | — | — | |
| Eaton Corp. plc | 0.26 | 0.27 | — | — | — | |
| GE Aerospace | 0.19 | 0.19 | — | — | — | |
| Honeywell International Inc. | 0.33 | 0.32 | — | — | — | |
| Lockheed Martin Corp. | 0.32 | 0.26 | — | — | — | |
| RTX Corp. | 0.21 | 0.21 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Sector | ||||||
| Capital Goods | 0.30 | 0.29 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | ||||||
| Industrials | 0.34 | 0.34 | — | — | — | |
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 2022 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 717,467 ÷ 2,851,894 = 0.25
2 Click competitor name to see calculations.
The solvency profile between 2019 and 2022 reflects a transition from a nearly debt-free capital structure to a more leveraged position. While the organization maintained minimal liabilities for several years, a substantial shift in financing strategy occurred in 2022.
- Asset Growth Trend
- Total assets demonstrated consistent and significant growth over the five-year period, increasing from US$719.5 million in 2018 to US$2.85 billion by the end of 2022. This steady upward trajectory indicates a continuous expansion of the balance sheet.
- Debt Accumulation
- Total debt, including operating lease liabilities, remained nominal between 2019 and 2021, ranging from US$10.6 million to US$27.0 million. A sharp inflection point occurred in 2022, where total debt escalated to US$717.5 million, representing a substantial increase in borrowed capital.
- Debt to Assets Ratio Analysis
- The debt to assets ratio remained marginal from 2019 to 2021, fluctuating between 0.01 and 0.02, which indicates that assets were almost entirely funded through equity or internal cash flows. In 2022, the ratio rose to 0.25, signaling that 25% of total assets are now supported by debt obligations.
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Financial Leverage
Axon Enterprise Inc., financial leverage calculation, comparison to benchmarks
| Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | Dec 31, 2018 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in thousands) | ||||||
| Total assets | 2,851,894) | 1,688,210) | 1,381,023) | 845,639) | 719,540) | |
| Stockholders’ equity | 1,268,491) | 1,047,849) | 976,255) | 543,495) | 467,324) | |
| Solvency Ratio | ||||||
| Financial leverage1 | 2.25 | 1.61 | 1.41 | 1.56 | 1.54 | |
| Benchmarks | ||||||
| Financial Leverage, Competitors2 | ||||||
| Boeing Co. | — | — | — | — | — | |
| Caterpillar Inc. | 5.16 | 5.02 | — | — | — | |
| Eaton Corp. plc | 2.06 | 2.07 | — | — | — | |
| GE Aerospace | 5.16 | 4.93 | — | — | — | |
| Honeywell International Inc. | 3.73 | 3.47 | — | — | — | |
| Lockheed Martin Corp. | 5.71 | 4.64 | — | — | — | |
| RTX Corp. | 2.19 | 2.21 | — | — | — | |
| Financial Leverage, Sector | ||||||
| Capital Goods | 4.71 | 4.55 | — | — | — | |
| Financial Leverage, Industry | ||||||
| Industrials | 4.65 | 4.52 | — | — | — | |
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 2022 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity
= 2,851,894 ÷ 1,268,491 = 2.25
2 Click competitor name to see calculations.
Between 2018 and 2022, a substantial expansion of the balance sheet is observed, characterized by consistent growth in both total assets and stockholders' equity. The most pronounced acceleration in asset accumulation occurred during 2020 and 2022, indicating a period of rapid scaling in the company's resource base.
- Total Asset Expansion
- Total assets grew from 719.5 million in 2018 to 2.85 billion by 2022. This trajectory reflects a nearly fourfold increase over the five-year period, with the most significant surges occurring in 2020 and 2022, where asset values increased by approximately 63% and 69% respectively.
- Stockholders' Equity Growth
- Equity increased from 467.3 million in 2018 to 1.27 billion in 2022. While the upward trend is consistent, the growth in equity remained more moderate compared to the growth in total assets, particularly in the final year of the analyzed period.
- Financial Leverage Analysis
- The financial leverage ratio exhibited relative stability between 2018 and 2021, fluctuating within a narrow range of 1.41 to 1.61. A significant shift is noted in 2022, as the ratio rose sharply to 2.25. This indicates a marked increase in the reliance on liabilities to finance asset growth, resulting in a higher degree of financial leverage compared to the preceding four years.
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Interest Coverage
Axon Enterprise Inc., interest coverage 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) | ||||||
| Net income (loss) | 147,139) | (60,018) | (1,724) | 882) | 29,205) | |
| Add: Income tax expense | 49,379) | (81,357) | (4,567) | 1,188) | (1,101) | |
| Add: Interest expense | 488) | 28) | 55) | 46) | 86) | |
| Earnings before interest and tax (EBIT) | 197,006) | (141,347) | (6,236) | 2,116) | 28,190) | |
| Solvency Ratio | ||||||
| Interest coverage1 | 403.70 | -5,048.11 | -113.38 | 46.00 | 327.79 | |
| Benchmarks | ||||||
| Interest Coverage, Competitors2 | ||||||
| Boeing Co. | -0.98 | -0.88 | — | — | — | |
| Caterpillar Inc. | 20.80 | 17.88 | — | — | — | |
| Eaton Corp. plc | 21.22 | 21.11 | — | — | — | |
| GE Aerospace | 1.88 | -0.96 | — | — | — | |
| Honeywell International Inc. | 16.41 | 22.09 | — | — | — | |
| Lockheed Martin Corp. | 11.72 | 14.27 | — | — | — | |
| RTX Corp. | 5.64 | 4.71 | — | — | — | |
| Interest Coverage, Sector | ||||||
| Capital Goods | 4.84 | 3.98 | — | — | — | |
| Interest Coverage, Industry | ||||||
| Industrials | 4.98 | 5.14 | — | — | — | |
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 2022 Calculation
Interest coverage = EBIT ÷ Interest expense
= 197,006 ÷ 488 = 403.70
2 Click competitor name to see calculations.
The analysis of interest coverage from 2018 to 2022 reveals a period of significant volatility in operational profitability, resulting in a fluctuating capacity to service debt obligations. While the period concludes with a strong solvency position, the intervening years show a marked decline followed by a rapid recovery.
- Earnings Before Interest and Tax (EBIT) Trends
- Operational earnings experienced extreme variance over the five-year period. After starting at 28.19 million USD in 2018, EBIT declined sharply to 2.12 million USD in 2019 and entered negative territory in 2020. The downward trend peaked in 2021 with a substantial operating loss of 141.35 million USD. However, 2022 marked a significant turnaround, with EBIT rising to 197.01 million USD, representing the highest operational profit in the analyzed period.
- Interest Expense Analysis
- Interest expenses remained relatively low and stable throughout the period, ranging from a minimum of 28 thousand USD in 2021 to a maximum of 488 thousand USD in 2022. Despite a notable increase in interest costs in 2022, the absolute magnitude of these expenses remained minimal relative to the scale of operational earnings and losses.
- Interest Coverage Ratio Interpretation
- The interest coverage ratio mirrors the volatility of the EBIT. The ratio began at a robust 327.79 in 2018, indicating an exceptional ability to cover interest payments. This plummeted to 46.00 in 2019 and became negative in 2020 and 2021, reaching a nadir of -5,048.11. These negative values indicate that operating profits were insufficient to cover interest expenses during those years. By the end of 2022, the ratio recovered to 403.70, signaling that the ability to service debt has returned to a level exceeding that of the 2018 baseline.
Overall, the solvency risk associated with interest payments was temporarily elevated between 2020 and 2021 due to operational losses rather than an unsustainable increase in debt servicing costs. The substantial increase in EBIT by the end of 2022 has effectively mitigated these solvency concerns.
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Fixed Charge Coverage
Axon Enterprise Inc., fixed charge coverage 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) | ||||||
| Net income (loss) | 147,139) | (60,018) | (1,724) | 882) | 29,205) | |
| Add: Income tax expense | 49,379) | (81,357) | (4,567) | 1,188) | (1,101) | |
| Add: Interest expense | 488) | 28) | 55) | 46) | 86) | |
| Earnings before interest and tax (EBIT) | 197,006) | (141,347) | (6,236) | 2,116) | 28,190) | |
| Add: Operating lease expense | 8,703) | 7,495) | 6,757) | 4,627) | 4,200) | |
| Earnings before fixed charges and tax | 205,709) | (133,852) | 521) | 6,743) | 32,390) | |
| Interest expense | 488) | 28) | 55) | 46) | 86) | |
| Operating lease expense | 8,703) | 7,495) | 6,757) | 4,627) | 4,200) | |
| Fixed charges | 9,191) | 7,523) | 6,812) | 4,673) | 4,286) | |
| Solvency Ratio | ||||||
| Fixed charge coverage1 | 22.38 | -17.79 | 0.08 | 1.44 | 7.56 | |
| Benchmarks | ||||||
| Fixed Charge Coverage, Competitors2 | ||||||
| Boeing Co. | -0.70 | -0.64 | — | — | — | |
| Caterpillar Inc. | 14.92 | 12.73 | — | — | — | |
| Eaton Corp. plc | 10.01 | 10.40 | — | — | — | |
| GE Aerospace | 1.35 | -0.22 | — | — | — | |
| Honeywell International Inc. | 11.00 | 13.67 | — | — | — | |
| Lockheed Martin Corp. | 8.44 | 9.95 | — | — | — | |
| RTX Corp. | 4.40 | 3.66 | — | — | — | |
| Fixed Charge Coverage, Sector | ||||||
| Capital Goods | 3.61 | 3.06 | — | — | — | |
| Fixed Charge Coverage, Industry | ||||||
| Industrials | 3.30 | 3.44 | — | — | — | |
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 2022 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 205,709 ÷ 9,191 = 22.38
2 Click competitor name to see calculations.
The analysis of fixed charge coverage reveals a period of extreme volatility between 2018 and 2022, characterized by a severe deterioration in the ability to meet fixed obligations followed by a substantial recovery in the final year of the period.
- Earnings Before Fixed Charges and Tax
- A significant downward trajectory is observed from 2018 through 2021. Earnings plummeted from 32,390 thousand US dollars in 2018 to a deficit of 133,852 thousand US dollars in 2021. However, this trend reversed sharply in 2022, with earnings surging to 205,709 thousand US dollars, marking the highest level within the analyzed timeframe.
- Fixed Charge Obligations
- Fixed charges exhibited a consistent and linear increase throughout the five-year period. Costs rose steadily from 4,286 thousand US dollars in 2018 to 9,191 thousand US dollars by 2022, indicating a growing baseline of financial commitments regardless of operating performance.
- Fixed Charge Coverage Ratio
- The coverage ratio mirrors the volatility of earnings against the backdrop of rising fixed costs. A strong starting position of 7.56 in 2018 eroded rapidly, reaching a critical low of 0.08 in 2020 and falling into negative territory in 2021 at -17.79. This negative value indicates that operating earnings were insufficient to cover fixed charges during that fiscal year. By 2022, the ratio rebounded to 22.38, signifying a robust capacity to service fixed obligations.
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