Axis Q3 2015 Growth Rebounds

By John Honovich, Published Oct 15, 2015, 12:00am EDT

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.

Financials Overview

Q3 2015 sales increased 12% in local currencies year over year, compared to the previous quarter's 1% decline yoy.

Geographically, the Americas led the way, both in terms of growth rate (16%) and overall size (57% of overall revenue). This was a sharp turnaround compared to the previous quarter where growth was -5%.

Europe was solid with 10% growth but Axis continues to struggle in Asia where they had no growth (0% but better than the previous quarter which was -9%).

Driver / Explanation

The rebound seems to be a resolution of a mistake last quarter, not a fundamental shift upwards. Axis explained that, in the Americas, the jump in sales quarter over quarter was driven by a recovery from "supply chain disruptions" in Q2. At that time, Axis noted, "incoming orders in the quarter were significantly higher than reported sales." Axis told IPVM that this was "mainly due to forecasts not matching the actual product mix during a period." However, they declined to comment on what product mix issues caused that.

Constraining Costs / Expansion

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Both in terms of hiring and spending, Axis has slowed costs / expansion. Year over year, operating expenses are just up ~10%. In 2014, Axis added over 300 employees at a rate of ~20%. However, for the past half year, Axis has added just 90 employees.

Access Control Growth?

Axis has had sharp growth in their 'other' revenue category. Historically, this was for their print server business but that has almost completely dried up. By contrast, 'other' revenue has jumped sharply in 2015, now up ~$2 million USD for Q3, year over year. That is still only ~1% of Axis total sales but it may indicate that Axis A1001 is seeing some adoption (though it certainly has not shaken up or severely impacted the overall access control market).

Outlook

These results are positive for Axis, showing that despite the continued commoditization of the low end of the market (which is still progressing strongly), Axis is able to maintain its market position. 12% growth though appears to be abnormally high going forward (due to the supply chain resolution), but single digit growth appears possible.

Also, on the positive side, Axis continues to release many new products primarily catered to higher end and more niche uses that can command a premium. The challenge will be how much Axis can stop the defection of low to mid market integrators / users who are increasingly wooed by the combination of Chinese competitors, like Hikvision, who offer similar feature sets and support at much lower prices.

1 report cite this report:

Axis Q4 2015 Financial Results on Jan 26, 2016
Axis growth has been decelerating and struggling for some time. However, last...
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