Axis Q3 2015 Growth Rebounds

By: John Honovich, Published on Oct 15, 2015

After an extremely bad Q2, where true sales actually declined, Axis has bounced back in Q3.

Is this the beginning of a comeback for the former video surveillance market leader or is this a blip?

In this note, we examine their financial results, looking at sources of growth and changes in expansion.

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** **** ****, ** examine ***** ********* *******, looking ** ******* ** growth *** ******* ** expansion.

[***************]

Financials ********

** ********* ***********% ** ***** ********** year **** ****, ******** to *** ******** *******'* 1% ******* ***.

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Driver / ***********

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Constraining ***** / *********

**** ** ***** ** hiring *** ********, **** has ****** ***** / expansion. Year **** ****, ********* expenses *** **** ** ~10%. ** ****, **** added over *** ********* ** a **** ** ~**%. However, *** *** **** half ****, **** *** added **** ** *********.

Access ******* ******?

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*******

***** ******* *** ******** for ****, ******* **** despite *** ********* *************** of *** *** *** of *** ****** (***** is ***** *********** ********), Axis ** **** ** maintain *** ****** ********. 12% ****** ****** ******* to ** ********** **** going ******* (*** ** the ****** ***** **********), but ****** ***** ****** appears ********.

****, ** *** ******** side, **** ********* ** release **** *** ******** primarily ******* ** ****** end *** **** ***** uses **** *** ******* a *******. *** ********* will ** *** **** Axis *** **** *** defection ** *** ** mid ****** *********** / users *** *** ************ wooed ** *** *********** of ******* ***********, **** Hikvision, *** ***** ******* feature **** *** ******* at **** ***** ******.

Comments (13)

Good article, just one comment:

Americas was 57% of total sales in Q3...(instead of 52%).

Good eye, thanks and fixed. I was cross checking Axis financial reports from earlier in the year when it was 52%. Fascinating how big the Americas has become for Axis.

Here is the pie chart for others interested:

From the analysis above it sounds like the Q2 numbers were artificially low, due to an inability to fulfill all orders, and Q3 was artificially high, due to clearing out backlog once product was available to ship.

It sounds as if overall Axis business is seeing roughly 4-5% net growth (2% Q1, ~5% normalized Q2, ~6% normalized Q3)?

Well, Q1 2015 was 2% growth for Axis, and the second half of 2014 was 7%.

So yes, the trend is in the ~5% range. The bigger question becomes what happens going forward. Do all of their new products pull them up from that range? Does the ever increasing low-cost competition of Hikvision, Dahua, Hanwha/Samsung pull them down? My gut feel is that the latter will have a bigger impact than the former and that zero growth or declines is likely over the next 12 months.

YTD 09.2015, total net sales growth was +5% yoy in local currencies and +24% with exchange rate effects.

Good analysis, John. The commoditization of low end video doesn't bode well for manufacturers competing in the price-driven segment but the higher end is where Axis can & does compete. It's expensive funding innovation coupled with exceptional support but we all know the continual problems encountered with low priced solutions. Nobody wants to travel to the 100th floor in an elevator supplied by the lowest bidder.

At that time, Axis noted, "incoming orders in the quarter were significantly higher than reported sales."

I'm not sure I understand Swedish Accounting but, if not as recorded as sales, what would the incoming orders been recorded as?

IMHO, supply chain disruptions initially delay cash flow/income much more than sales revenue. Until they get to the point where customers start canceling orders or stop placing them because of bad promise dates.

It's not a sale unless you ship, typically. Ergo, they could not count it as a sale even though they had the PO.

I am not sure why they are calling it a 'supply chain disruptions' because it's not clear what exactly happened.

It's not a sale unless you ship, typically. Ergo, they could not count it as a sale even though they had the PO.

Ok, fair enough, but surely it's got be to be reflected at PO time in some G/L item, like advance sales or booked sales, don't you think?

Not an accountant nor an expert in Swedish accounting regulations, but it's a basic principle that if you are selling product, you don't count it as sales until it ships. Otherwise, you have companies crazy inflating sales numbers by getting POs on the last day of the period.

I am not sure why they are calling it a 'supply chain disruptions' because it's not clear what exactly happened.

My guess (somewhat educated) is that they had PO's from distributors for products they had yet to manufacture. The reasons include:

  1. new product announcements--but slow to fill orders for them.
  2. Also, they seemed to slow production during the period when they were being acquired and shortly after being acquired.
  3. Nor did they seem prepared for the busy summer season for K-12 school projects--being heavily back-ordered.

So, orders/PO's were in their hands, but they were not shipping, meaning these were not yet sales.

I agree.

In other industries, this backlog would be reflected in the book-to-bill ratio. Is there nothing like that for this industry?

I do not recall seeing metrics like that reported in financials for video surveillance manufacturers.

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