Axis posts 1Q numbers

 - 
04/20/2010

Axis has posted its preliminary numbers for Jan.-March 2010 and they're pretty pleased with themselves. First, the details (I encourage you to download the PDF on that page for the full story): Unfortunately, Axis reports its number in Swedish Kroners, which makes numbers a pain in the butt to report, but today the Kroner is worth about 14 cents, so I'll use that as a conversion. One thing to note is that at this time last year, the Kroner was only worth less than 12 cents, that it fluctuated up as high as almost 15 cents, and now is settling down below 14. So, if you compare historical reported dollars to current dollars instead of Kroners to Kroners, things can get a little wonky, so I'll stay Kroners to Kroners (SEK) when I'm reporting past to present. Anyhoo, things are better 1Q 2010 than 1Q 2009, any way you slice it: Video sales are is up to 633.1 million SEK ($88.63 million) from 509.7 SEK a year ago, an increase of 24 percent. Not bad. However, those video sales are actually down from 645.8 million SEK last quarter. So it's not exactly a V-shaped recovery we're looking at here. Further, company-wide, cash flow from operating activities was actually down from 1Q 2009 to 1Q 2010: from 68.9 million SEK to 68.5 million SEK. The Americas are a little different story, though, with the last five quarters looking like this: 1Q 2009: 259.2 SEK 2Q 2009: 277.8 SEK 3Q 2009: 281.6 SEK 4Q 2009: 266.8 SEK 1Q 2010: 285.2 SEK ($39.928 million) That's nice steady growth quarter to quarter, minus the blip in 4Q. Further, the company is healthier by measure of total assets: 1,259 million SEK now compared with 916 million SEK at the end of 1Q 2009. And the company has more employees now, 784, compared with the end of 1Q 2009, 739. And it still remains true that Axis did only 173.8 million SEK in 1Q of 2008, so any big picture analysis still shows a fast-growing company and a continuing adoption of IP video technology. The questions that remain: Is the past-year growth representative of overall growth in the security marketplace, or just conversion from analog sales to IP sales? If corresponding analog sales are down as much as IP sales are up, the net gain of the market is nil, obviously. I've asked investment-type companies recently why they like the security industry and a lot of them point to the growth experienced and predicted for IP-surveillance. My argument is that if those sales are at the expense of previously analog sales, the actual growth of the market isn't really doing much. If you're investing in an IP surveillance manufacturer, maybe that's smart, but I still think that growth is fueled often by legacy manufacturers converting sales from analog to IP and, thus, just because you're an IP surveillance manufacturer doesn't mean there's overall market growth to tap into. If the number of players grows as fast as the market, then there's more people sitting at the table and the same amount to go around, right? Anyway, Axis hedges its bets about the financial recovery in general and whether it can sustain growth (managing expectations is what you do in quarterly reports):

After a year of great uncertainty regarding the market trend, the market now appears to have stabilized in several respects. The positive sales trend from the end of 2009 has continued during the beginning of the year. At the same time, there is still some risk of supply disruptions due to component shortages. Although the stabilization, the immediate future is difficult to judge and it is unclear how sustainable the recovery is.

This is the first I'm noticing of the "component shortages." I'll have to look into that. Also, see if you agree with some of the conclusions Axis reaches:

Some factors are clear, however: - The long-term shift from analog video solutions to network systems continues to imply strong long-term growth potential for Axis’ products. - With a constantly broadening of the product portfolio and a very competitive offering, Axis is well-equipped for the future. - The broad and large network of partners means that Axis is well-represented and can offer customized solutions on most markets.

I think the first part is almost definitely true. As prices start to come down and installation becomes easier, IP cameras are becoming much more attractive to the average installer, and the demand on the end user side seems robust. Further, non-security surveillance applications seem to favor IP cameras by a lot. The second two points are hard to judge as they're so broad and seemingly a priori. Is it better to have a very broad product line? That's been a complaint of installers of IP cameras in general - not enough options for domes, etc. - so that would seem to make sense. Is it good to have lots and lots of partners selling your products? Can't see how that would hurt. Or are they talking about technology partners? Either way, those last two points are probably true. If you want to listen to a recording of Ray Mauritsson, Axis president and Fredrik Sjöstrand, CFO, talking about the results, you can do so for 10 days from now by calling +46 (0)8 5052 0333, code number 863245.

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