Axis Growth Rebounds Q3 2013

Axis had its best quarter in more than a year, rebounding from recent slow growth, to its old high growth pace. In this note, we examine what drove it and whether they can sustain it.

Financials Overview

Key details from the report:

• 27% revenue growth in local currency terms for Q3 2012, a very strong number, that excludes random currency fluctuations. Last quarter, the Q2 2012 number was only 12% and the Q1 2012 one was 16%.
• ~$200 million USD in revenue for the quarter, pace for $800 million annually.
• Says, "interest is growing, particularly in banks, education and retail."
• EMEA growth was 33% which is somewhat shocking since they have been struggling to get any growth in recent quarters there. Here's the graph of it:

On the call, Axis mentioned that EMEA benefited from soft comparables (i.e., a weak Q3 2012).

• Asia growth was 39% which is strong, though of course, on a low base. Axis interestingly noted that, "A local development
  department has been in place in China since early 2013 in order to meet regional market needs and regulations in the best way."
• Operating margin was 19.% which is quite strong for Axis' historical standards.

The access control expansion was mentioned repeatedly, but no specific guidance was given for specific sales.

Maintain High Growth

Axis' financial chart shows their challenges maintaining high growth over the last few years:

Since 2011, they have only had 3 strong quarters, with 6 poor ones of 15% or under.

$2 Billion Market Capitalization

Axis market cap is now ~$2 billion USD, about 2.5 times their 2013 sales.

Investor's Call Questions

When asked about acquisitions, Axis did not appear interested in or planning to acquire any company, noting that they "have no history nor tradition of growing through acquisitions" and that "it is not a central part of  our strategy going forward either."

When asked about all regions continuing performing strongly and whether there is a trend shift, Axis responded, "We don't see any underlying changes happening ... many positive effects happening at the same time in one quarter." This implies that Axis themselves may be expecting lower growth than this quarter's in the recent future.

Axis still says weaker development in southern Europe but that all sub regions contributed / improved.

Products: Axis reports more fixed dome sales and more M series sales.

Axis says they are happy with the progress with small systems, and rate of downloads of ACC, but did not offer specifics or numbers.

No word on how much AVHS is contributing...