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AXIL Brands (AXIL) Earnings & Sales Increase Y/Y in FY24

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AXIL Brands, Inc.’s (AXIL - Free Report) fiscal 2024 earnings results reflect the impacts of the complexities of rapid growth and rising costs. While the year showcased substantial revenue gains and notable improvements in earnings per share, the challenges of scaling (particularly through increased branding, marketing and operational expenses) have started to weigh on profitability. As AXIL continues to expand its market presence, investors are faced with a mixed outlook, wherein robust top-line growth is tempered by tightening margins and pressures on cash flow.

AXIL Brands, Inc. Price, Consensus and EPS Surprise

 

AXIL Brands, Inc. Price, Consensus and EPS Surprise

AXIL Brands, Inc. price-consensus-eps-surprise-chart | AXIL Brands, Inc. Quote

Fiscal 2024 Results

AXIL Brands reported fiscal 2024 earnings per share of 21 cents, increasing from 10 cents a year ago.

For fiscal 2024, AXIL Brands reported year-over-year net sales growth of 17%, reaching $27.5 million from $23.5 million in the prior year.

This growth was primarily driven by enhanced marketing and sales initiatives within the hearing protection and enhancement segment, which accounted for approximately 95% of total revenues.

Key Business Metrics

AXIL Brands' fiscal 2024 financial results highlight its ongoing efforts to scale its operations, while grappling with rising expenses. The significant year-over-year increase in sales demonstrates the effectiveness of the company's strategic initiatives, particularly in expanding distribution and retail channels. However, sharp rises in the cost of sales and operating expenses compressed margins, signaling potential challenges ahead.

Consequently, gross profit increased year over year to $20.2 million from $17.7 million, though the gross margin narrowed slightly to 73.4% from 75.3% primarily due to expansion costs into new retail and distribution channels.

Despite these higher costs, AXIL Brands achieved a net income of $2 million, an improvement from $1.8 million a year earlier. The net income available to common shareholders was significantly bolstered to $3.3 million due to a gain on the redemption of preferred shares.

The company maintained a solid operating income of $1.5 million, though this was a decrease from $2 million in the prior year. The net profit margin stood at 7.3%, slightly lower than the 7.8% reported in the prior year.

Additionally, the return on equity was robust, supported by the increase in net income available to common shareholders, reflecting the company’s strategic efforts to optimize its capital structure.

Costs

Despite impressive revenue growth, the cost of sales rose 26% to $7.3 million from $5.8 million in fiscal 2023. This escalation in costs was due to the increased expenses associated with branding and marketing efforts, which, while boosting sales, also heightened cost pressures.

The company's operating expenses increased 19% year over year to $18.7 million, reflecting higher marketing and selling expenses, increased compensation, and rising general and administrative costs.

Cash & Debt

Cash flow also showed some strain, with net cash provided by operating activities dwindling to just $2,677 from the $2.9 million generated in the prior year. This decline in cash flow underscores the impacts of increased costs on the company's liquidity.

On the balance sheet, cash reserves decreased year over year to $3.25 million from $4.83 million, reflecting the company's ongoing investments and the repurchase of preferred stock.

AXIL's total liabilities also declined slightly to $3.28 million from $3.5 million in fiscal 2023, indicating some level of financial discipline amid rising expenses.

Management View

Management commentary suggests a continued focus on expanding global presence and strategic partnerships, with an emphasis on optimizing existing relationships and establishing new ones. The company’s strategic initiatives are geared toward driving sustainable growth and maximizing potential in dynamic markets.

Other Developments

The most notable development in the year was the significant reduction in weighted average outstanding shares on a fully diluted basis, which dropped 49% to 8.3 million shares as of Aug 13, 2024. This reduction was largely caused by the redemption of preferred shares, which contributed to the increase in net income available to common shareholders.

AXIL Brands' results in fiscal 2024 showcase a company in growth mode but facing the inevitable pressures of scaling. Investors should weigh the benefits of the company’s revenue growth against the challenges posed by rising costs and margin compression. The reduction in share count and the focus on international expansion are positive signs, but the pressure on profitability is concerning as the company continues its aggressive growth strategy.


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