Axon Enterprise Inc. (NASDAQ:AXON)

Inventory Turnover

The inventory turnover ratio began at 4.78 in early 2019 and exhibited a gradual decline through 2020, reaching a low point around 2.65 to 2.98. This suggests slower inventory movement during this period. Subsequently, there was a slight recovery in 2021 with the ratio increasing to approximately 3.48 by the fourth quarter. However, from 2021 onward, the turnover ratio declined steadily once more, falling to 2.27 by Q1 2023, indicating continued challenges in inventory management or slower sales.

Receivables Turnover

The receivables turnover ratio showed fluctuations over the analyzed period. It started between 3.22 and 3.33 in 2019, briefly rose to nearly 3.8 to 3.9 in parts of 2020 and 2021, indicating improved collection efficiency. Nevertheless, from mid-2021 to early 2023, the turnover rate tapered off, hovering around 2.56 to 2.69, although it slightly improved towards the end of the period, reaching approximately 3.32 by Q1 2023. This pattern reflects varied effectiveness in collecting receivables, with some periods of slower collections.

Payables Turnover

The payables turnover ratio demonstrated significant volatility. Starting at 10.65 in early 2019, it peaked notably at 39.29 in Q3 2021, indicative of rapid payments to suppliers during that quarter. However, other quarters witnessed lower turnover ratios, often ranging between 6 and 14. In the last two years, a decline was observed, with the ratio stabilizing around 7.5 to 8.2, suggesting a more measured pace in settling payables in recent periods.

Working Capital Turnover

The working capital turnover ratio showed moderate variability. Initially close to 1.07 in early 2019, it rose gradually to highs of around 1.37 in Q4 2022, reflecting more efficient use of working capital to generate sales. However, the period ended with a decline to approximately 0.89 in early 2023, indicating a possible reduction in operational efficiency or sales relative to working capital.

Average Inventory Processing Period (Days)

The number of days to process inventory increased substantially over time. In 2019, the average ranged from 76 to 82 days, then dropped to as low as 63 days in Q1 2020 before rising sharply to above 120 days during late 2020 and into 2021. This upward trend continued into 2022 and early 2023, reaching a peak of 161 days. This increase signals lengthening inventory holding periods, which could point to slower sales or inventory management issues.

Average Receivable Collection Period (Days)

The collection period for receivables showed fluctuations, starting near 113 to 125 days in early 2019, decreasing to around 90 days during mid-2021, indicating improved collections. However, there was a subsequent rise to approximately 140 days through late 2022, suggesting a slowdown in collections, followed by a decline back to near 110 days by early 2023.

Operating Cycle (Days)

The operating cycle varied considerably during the period. Beginning near 189 days in early 2019, it increased significantly to over 290 days by late 2022, implying an elongation of the total time from inventory acquisition through receivable collection. In early 2023, it stabilized around 270 days, still substantially longer than at the start, which may indicate operational inefficiencies or challenges in turnover.

Average Payables Payment Period (Days)

The average number of days to pay suppliers varied widely. Starting at 34 days in early 2019, it decreased to as low as 9 days during early 2021, indicating faster payments. Subsequently, the payment period lengthened, reaching over 50 days in late 2022, and remained near 48 days in early 2023, suggesting a strategy of extending payables to conserve cash or delays in payments.

Cash Conversion Cycle (Days)

The cash conversion cycle, calculated as operating cycle minus payables payment period, increased markedly over the timeframe. It rose from around 155 days in early 2019 to peaks exceeding 250 days in 2022, demonstrating longer cash exposure and delays in cash recovery. By early 2023, it slightly reduced to approximately 222 days but remained elevated relative to the beginning of the period. This indicates increased working capital investment requirements and potential liquidity pressures.

The cost of sales demonstrates a generally increasing trend across the periods observed, indicating growth in production or goods sold. Starting at approximately $36.7 million in the first quarter of 2018, the cost shows fluctuations with some quarters experiencing notable spikes—particularly in the fourth quarter of 2019 and continuing through the subsequent years. The highest recorded cost of sales appears in the first quarter of 2023, nearing $139 million, more than tripling the initial value. This upward trend suggests an expansion in scale or increased input costs over time.

Inventory levels exhibit a marked increase over the timeline. Initial values in early 2018 hover around $43 million, with minor fluctuations until the end of 2019. From 2020 onwards, inventory shows a significant upward trajectory, surging beyond $200 million by the first quarter of 2023. This substantial rise could indicate accumulation of stock, potentially linked to production scale-up or forecasting changes in demand. This growth in inventory is relatively steady and persistent.

Inventory turnover ratios, reported from the third quarter of 2018, show variability with an overall declining trend in recent years. Initially, the ratio fluctuates around 4.5 to 5.7, suggesting moderate efficiency in inventory management. However, from 2020 onwards, the turnover ratio decreases steadily, dropping from above 3.0 to around 2.27 by early 2023. This decline implies that inventory is being sold or used at a slower rate relative to its level, potentially signaling challenges in sales velocity or overstocking issues as inventory levels rise markedly.

Cost of Sales

Consistent upward trend over time with periodic spikes, reflecting growing operational scale or input cost increases.

Increased more than threefold from early 2018 to early 2023.

Inventory

Significant and steady growth, particularly pronounced from 2020 onwards.

Risen nearly fivefold from approximately $43 million to $220 million between early 2018 and early 2023.

Inventory Turnover

Declining trend in efficiency, with ratios decreasing from above 4.5 to near 2.3 levels.

Suggests slower inventory movement relative to the accumulated stock, possibly reflecting sales challenges or inventory build-up.

Net Sales

The net sales show a generally upward trend over the entire period from March 2018 to March 2023. Starting at approximately $101.2 million in the first quarter of 2018, sales experienced moderate fluctuations through 2019, with a significant increase during the fourth quarter of 2019 ($171.9 million). Despite a slight dip in early 2020, net sales rebounded strongly by the end of 2020, reaching $226.1 million. The growth continued with some fluctuations, notably a peak in the third quarter of 2022 at $311.8 million, and finally achieving $343.0 million in the first quarter of 2023. This reflects consistent revenue growth, indicating expanding market presence or increased sales volumes.

Accounts and Notes Receivable, Net of Allowance

Receivables followed a rising pattern in line with the growth in net sales, increasing substantially from $87.8 million in March 2018 to a peak of $418.3 million by December 2022. The upward movement suggests that the volume of credit sales or collection periods may have increased over time. There was some variability in the first quarter of 2023, where receivables decreased to $379.9 million, which might indicate improved collections or changes in credit policy. The strong growth of receivables relative to sales highlights the importance of monitoring collection efficiency and working capital management.

Receivables Turnover Ratio

The receivables turnover ratio fluctuated throughout the observed periods, beginning with values around 3.2 to 3.3 in 2018 and 2019, indicating moderate efficiency in collecting receivables. The ratio peaked in mid-2021 at approximately 4.0, suggesting improved collection performance during that time. However, there was a downward trend starting late 2021, with the ratio declining to around 2.5 to 2.7 by late 2022, signaling slower collections or potentially longer credit terms extended to customers. The slight recovery in the first quarter of 2023 to about 3.3 shows some improvement. Overall, the trend reveals a period of weakening receivables management efficiency, which requires attention to ensure cash flow sustainability.

Summary of Financial Trends

The analysis indicates strong revenue growth over the five-year span, coupled with increasing receivables, which suggests expanding business but also rising demands on working capital. The variability and eventual decline in the receivables turnover ratio point to potential challenges in cash collections or credit control, which could impact liquidity if not addressed. The company demonstrates positive top-line momentum, but the management of accounts receivable will be critical to support ongoing operational needs and financial health.

The examined quarterly financial data reveal distinct dynamics in cost of sales, accounts payable, and payables turnover ratios over the analyzed period.

Cost of Sales

The cost of sales exhibits an overall upward trend from March 31, 2018, through March 31, 2023. Starting at approximately 36.8 million USD, the cost progressively increased, with notable spikes at the end of 2019 and throughout 2022, reaching a peak value of approximately 138.9 million USD in March 2023. This pattern suggests increased production or procurement costs over time, with significant seasonal or period-specific surges, particularly in the last quarters of the years 2019 and 2022.

Accounts Payable

Accounts payable values also show a general increasing pattern, starting from around 11.7 million USD in early 2018 and rising to nearly 66.0 million USD by March 2023. The data indicate substantial growth during certain quarters, such as the fourth quarters of 2019 and 2022. Despite some fluctuations, the trend portrays increasingly higher liabilities payable to suppliers, paralleling the growth in cost of sales but with occasional periods of decline, notably in mid-2021.

Payables Turnover Ratio

The payables turnover ratio demonstrates variability with no consistent long-term upward or downward trend. The ratio fluctuates between approximately 6.0 and 39.3 over the period, indicating shifts in payment efficiency or timing. Noteworthy are the peaks at the fourth quarter of 2021 (approximately 39.3), which may correspond to improved payment cycles or changes in credit terms. In contrast, lower values such as around 6.0 to 7.5 in several periods suggest slower payment processes relative to purchases in those times.

Overall, the data indicate increasing costs and corresponding accounts payable obligations over time, with notable volatility in the efficiency of payables turnover. This suggests growing operational scale accompanied by fluctuating supplier payment behavior, which could reflect strategic adjustments in working capital management or external factors affecting supply chain payment terms.

The analysis of the quarterly financial data reveals several significant trends and shifts over the indicated periods.

Working Capital

The working capital has generally shown an upward trajectory from March 2018 through March 2023. Starting at approximately 130 million US dollars in early 2018, it experienced consistent growth with some fluctuations, reaching over 1.4 billion US dollars by the first quarter of 2023. Notably, there were pronounced increases particularly around mid-2020 and early 2023, suggesting periods of expansion in liquid assets available to cover short-term liabilities.

Net Sales

Net sales exhibited a steady increase over the period. Beginning near 101 million US dollars in the first quarter of 2018, sales grew with some variability quarter-to-quarter but maintained an upward trend, reaching over 343 million US dollars by March 2023. Seasonal fluctuations appear to have less impact in the latter periods, with sales showing strong growth particularly from mid-2020 onwards, which may indicate enhanced market demand or increased product penetration.

Working Capital Turnover Ratio

The working capital turnover ratio, which measures how efficiently the company is using its working capital to generate sales, displayed moderate variability. Early data is missing, but from 2019 onward, the ratio typically ranged between approximately 0.9 and 1.38. Peaks above 1.3 were observed in late 2019 and throughout 2021 and 2022, indicating periods of improved efficiency in utilizing working capital. However, a decline to around 0.89–0.99 in early 2023 suggests a relative decrease in turnover efficiency despite the increase in both sales and working capital, possibly reflecting changes in inventory levels or receivables.

Overall, the company has experienced robust growth in both working capital and net sales over the analyzed quarters, accompanied by fluctuating but generally strong working capital efficiency. The notable acceleration in working capital in early 2023 points to a strategic buildup of liquid resources, although the turnover ratio's decline during the same period calls for further monitoring of capital utilization effectiveness.

Inventory Turnover Ratio

The inventory turnover ratio exhibits a general declining trend over the periods analyzed. Initially recorded at a level near 4.78 in early 2019, the ratio decreases steadily through 2019 and 2020, reaching approximately 2.65 by the end of 2020. A modest recovery is observed through 2021, with the ratio increasing to around 3.48 in late 2021. However, from early 2022 onwards, the ratio declines again, dropping below 2.5 by the first quarter of 2023, indicating a slower rate of inventory turnover.

Average Inventory Processing Period

The average inventory processing period, expressed in days, shows an inverse pattern relative to the inventory turnover ratio. Beginning at approximately 76 days in early 2019, the period increases throughout 2019 and experiences a sharp rise in 2020, peaking around 138 days near the end of that year. Following a slight decrease in 2021, the processing period resumes its upward trend, reaching approximately 160 days by early 2023. This indicates a lengthening duration for inventory to be processed over time.

Trend Analysis and Interpretations

Overall, the data suggest a deterioration in inventory management efficiency, as evidenced by the decreasing inventory turnover ratio and the increasing average inventory processing period. The marked decline in turnover ratio and corresponding increase in processing days during 2020 may reflect operational challenges, possibly linked to external factors affecting supply chain or demand patterns. The partial improvement during 2021 indicates some recovery efforts, though the subsequent downturn in 2022 and early 2023 implies ongoing difficulties in maintaining inventory velocity. Prolonged inventory processing periods could impact working capital and may signify overstocking or slower sales.

Receivables Turnover Ratio

The receivables turnover ratio exhibits fluctuations over the analyzed quarters, generally ranging between approximately 2.56 and 3.99 times. Initial values from early periods in 2019 start around 3.22, decline to a low near 2.92, then increase to peaks near 3.99 toward the end of 2021. However, a gradual decline follows through 2022 to early 2023, stabilizing somewhat around 3.32 to 3.36 times. This pattern suggests variability in the efficiency with which receivables are collected, with periods of improved performance followed by slower turnover phases.

Average Receivable Collection Period (Days)

The average collection period inversely mirrors the turnover ratio, ranging from a high of approximately 143 days to a low near 91 days. Starting in early 2019, the collection period increases from 113 to a peak near 125 days, then declines to values near 95-96 days during mid-2020, indicating improved collection efficiency. Another improvement is evident in early 2021 with values dropping to the low 90s. However, a notable deterioration occurs through late 2021 to 2022, with days increasing and peaking around 143. Early 2023 data show a partial improvement, with the collection period reducing to near 110 days.

Summary and Insights

Overall, the data reflect cyclical trends in receivable management performance. Periods of enhanced cash flow efficiency, indicated by higher turnover ratios and shorter collection periods, are interspersed with phases of diminished performance, where turnover declines and collection days increase. The end of 2021 through much of 2022 presents a challenging interval with reduced receivables turnover and longer collection times, potentially signaling operational or market factors impacting cash collection. The slight recovery observed in early 2023 may suggest effectiveness of management actions or improving conditions. Close monitoring remains advisable to sustain and improve receivables management efficiency.

The analysis of the quarterly financial data reveals several notable trends in the company's working capital efficiency measures over the observed periods.

Average Inventory Processing Period

The average inventory processing period shows a clear upward trend starting from March 2019, when data first become available. Initially fluctuating within the 76 to 82 days range in 2019, it experienced a significant increase during 2020, reaching a peak of 138 days by the end of that year. Subsequently, this metric showed a gradual decline throughout 2021, dropping to around 105 days by mid-year, before it resumed an upward trajectory in 2022 and early 2023, reaching its highest observed value of 161 days by March 2023. This pattern suggests increasing inventory holding times, indicating slower inventory turnover and potential challenges in managing stock levels effectively in recent quarters.

Average Receivable Collection Period

The average receivable collection period exhibits considerable variability over the analyzed timeframe. Starting from around 113 days in March 2019, it rose to a peak of 125 days in June 2019 and then declined to a range between 90 to 110 days throughout 2020 and most of 2021, reflecting improved efficiency in receivables collection during that period. However, beginning in late 2021, there was a marked increase, with the period extending to approximately 140 days by December 2022, indicating slower collections and potentially relaxed credit terms or difficulties in collecting payments. Notably, this period shortened again in early 2023 to around 109 days, suggesting some recovery in collection practices.

Operating Cycle

The operating cycle, combining inventory and receivable periods, generally follows the movements in inventory processing and receivable collection durations. Commencing at 189 days in March 2019, it peaked during 2020 at 239-247 days, indicating an extended duration of converting inventory and receivables back into cash. A subsequent decrease was observed in 2021, bringing the operating cycle down to approximately 201 days by March 2021, but this was not sustained. The cycle lengthened again significantly during 2022 to nearly 296 days by December, highlighting prolonged capital tie-up in working capital components. The slight decrease to 270 days in early 2023 suggests some marginal improvement but overall indicates a longer operating cycle compared to earlier periods.

In summary, the data point to increasing inefficiencies in inventory management and receivable collections over recent years, particularly peaking in late 2022. While some improvement is noted in early 2023 regarding receivables and operating cycle duration, the extended inventory processing period remains a concern. These trends may impact the company's liquidity and operational responsiveness, suggesting a need for enhanced inventory control and credit management strategies.

The data exhibits notable fluctuations and some discernible trends in payables management over the observed periods.

Payables Turnover Ratio

Starting from a ratio of approximately 10.65 in late 2018, the payables turnover shows significant variability, peaking at 39.29 in the third quarter of 2021. Other notable high points include 20.12 in late 2018 and 17.4 in mid-2019. After the peak in 2021 Q3, there is a marked decline, with the ratio stabilizing around lower values ranging from approximately 6.3 to 10.96 in 2022 and early 2023.

This pattern suggests periods where the company expedited its payments to suppliers considerably, followed by intervals of slower turnover. The exceptionally high value in 2021 Q3 could indicate a short-term strategic decision to reduce payables rapidly or possibly an anomaly in payment cycle or vendor terms.

Average Payables Payment Period (Days)

The average payment period inversely correlates with the turnover ratio, ranging from a low of 9 days in 2021 Q3—coinciding with the peak payables turnover—to a high of about 61 days in 2020 Q3. Initial periods before 2019 show payment periods generally in the high twenties and low thirties range.

From mid-2019 onward, the payment period first lengthens substantially, reaching its maximum in mid-2020, then shortens dramatically by 2021 Q3, consistent with the observed spike in turnover ratio. Subsequently, payment periods fluctuate between approximately 31 and 58 days through 2022 and early 2023, indicating relatively longer payment durations compared to earlier years.

Overall, the trends reveal that the company’s payables management strategy has varied significantly, with phases of rapid payment followed by slower payment cycles. The pronounced peak in turnover and simultaneous drop in payment days in 2021 Q3 stands out as a key event, suggestive of a deliberate shift or exceptional circumstance impacting supplier payments.

The analysis of the quarterly financial periods reveals significant fluctuations and trends in the company's working capital management metrics over the observed timeline.

Average Inventory Processing Period

The average inventory processing period shows a rising trend, especially from the end of 2019 onwards. Starting at 63 days in March 2020, it markedly increased to 161 days by March 2023. This indicates that the company has been holding inventory for longer periods over time, which may suggest growing stock levels or slower inventory turnover in recent years.

Average Receivable Collection Period

The receivable collection period demonstrates variability but generally remains between approximately 90 and 140 days throughout the period. There was a decrease from 123 days in December 2020 to 93 days in March 2021, indicating improved collection efficiency. However, the period increased again reaching 143 days by December 2022 before slightly improving to 109 days by March 2023. This pattern suggests intermittent difficulties in collecting receivables promptly.

Average Payables Payment Period

The payables payment period exhibits high volatility during the timeframe. It ranged from a low of 9 days in September 2021 to a high of 61 days in September 2020. After peaking in late 2020, it generally maintained a level between 30 and 50 days in subsequent quarters. This variability indicates shifts in the company’s payment strategies or supplier terms over time.

Cash Conversion Cycle

The cash conversion cycle (CCC) reflects overall working capital efficiency and increased substantially from 122 days in March 2020 to a peak of 252 days in December 2022 before slightly improving to 222 days in March 2023. The upward trend in CCC is primarily driven by the extended inventory processing periods and fluctuating receivable collection times, partially offset by inconsistent changes in payables payment periods. This prolonged CCC suggests a growing length of time between cash outflows for purchases and cash inflows from receivables, which could indicate increased working capital requirements or liquidity pressures.

Overall, the data implies that the company faces challenges in maintaining efficient working capital management, with longer inventory holding and collection periods contributing to an increasing cash conversion cycle. These trends may have implications for liquidity and operational efficiency if not addressed.