Axil Brands Adds Hearing Enhancement To Hearing Protection
Traditional hearing protection muffles all sounds. Axil Brands (AXIL) offers simultaneous hearing protection and sound enhancement capabilities, filling a void in the marketplace.
The Problem
Hearing loss is a widespread problem. According to the National Institute for Occupational Safety and Health (NIOSH), approximately 22 million U.S. workers are exposed to hazardous noise levels at work, causing an estimated $242 million per year to be spent on workers’ compensation due to hearing loss disability. Roughly 50 percent of all recreational shooters may suffer hearing loss.
Industrial workplace noises, gunfire, music, and other familiar everyday sounds louder than 85 decibels (DB) can cause permanent hearing loss. City traffic inside a car can reach 85 DB. Nightclubs typically hit 97 DB while a leaf blower exceeds 100 DB.
Companies such as Howard Leight, Surefire, Racians, Walker's, and 3M Pelton offer hearing protection solutions, but do not emphasize simultaneous soft and medium level sound enhancement with loud sound muffling. People involved in their work roles and everyday situations want to participate in conversations with others, hear ambient sounds, listen to music, or speak on their cellphones while protecting themselves from harmful sound levels.
The Solution
Axil products enable hearing protection by filtering loud noises while allowing for enhanced hearing of other sounds through its patented technology, AudiCORE. The technology can process up to 1 million sounds per second, automatically converting sound waves into a digital code that enhances soft and medium sounds and softens loud sounds. AudiCORE is programmable and has over 100 options, allowing users to set up different configurations for different activities.
Company History
Axil's roots go back to Weston Harris' founding of SportEar in 2000. SportEar was the first company to offer a fully digital hearing protection device. The company targeted its product to shooters and hunters. SportEar merged with the Harris Hearing Group, a hearing aid company founded by door-to-door salesman and avid hunter Robert Harris, creating a family business. Robert is Weston's father. The merged company was rebranded as Axil in 2017 and was acquired by Reviv3, a hair and beauty product company, in 2022.
Reviv3 CEO and Chairman Jeff Toghraie assumed the Axil CEO and Chairman role and is the company's largest shareholder, with a 48% stake. Mr. Toghraie receives no salary or compensation for his work. He introduced a strategy transforming Axil from an unprofitable one-product company to profitability by introducing various products and forming branding and distribution partnerships.
Strategy
Axil's secret sauce formula for success has been offering a wide variety of products in a wide price range to fill a market void in combining hearing protection with ambient sound enhancement and supporting that effort with branding and distribution partnerships, such as with the U.S. Olympic Shooting Team. The partnership grants AXIL co-branding privileges on USA Shooting’s digital channels, event promotional materials, and signage at national competitions until 2028.
Axil partners with NASCAR, offering its dual hearing protection and enhancement capabilities with Bluetooth connection to the NASCAR app. The company also provides SIG Sauer-branded devices. SIG Sauer is a well-known firearms manufacturer. There is a similar branding partnership with Monster Jam, the organizer of dirt track competitions.
Axil is now concentrating on expanding its point of sales and international distribution markets. The company's products can now be found in Cabela’s, Bass Pro Shops, Scheels, and Walmart, and it has established European distribution partnerships.
Products
Axil offers earplugs, earmuffs, and earbuds in various styles, pricing, and technical capabilities. Axil recently introduced its new line of earplugs, the X series, which offers improved fitting and comfort. Earplugs are more favorable in indoor environments. The top-of-the-line XCOR PRO model has additional control options and is the company's flagship product.
Axil's earmuffs are more suitable for outdoor use as they are water-resistant and reduce wind noise. There are three earmuff models available. The TRACKR is a passive ear muff that employs no electronics. It costs less than $20 and is efficient in noise reduction, but it does not offer Bluetooth connection, and it is challenging to converse while wearing one.
The electronic TRACKR earmuffs cost about $50 and offer an audio input jack to plug in your cell phone and microphones that enhance ambient sound. The TRACKR BLU earmuff provides advanced features and costs about $150.
Axil offers earbuds at prices starting at about $200. These products provide Axil's advanced technology and convenience features.
Share Structure and Capitalization
The company completed a significant share repurchase in early 2024, buying back about 55% of the outstanding shares, including the majority of its preferred shares. There are 6.7 million shares outstanding. Fully diluted, the share count is 8.3 million.
The last reported cash position is $4.7 million and zero debt.
Insiders and institutions own about two-thirds of the shares. The company has reported 10 consecutive quarters of operating profits.
Valuation
The market values the stock at a similar level to its peer group but discounts the progress made over the last two years, as outlined above. What stands out to me is the company's transformation into a forward money machine. After establishing enviable profit margins and profitability metrics, the company is scaling sales by introducing new products, expanding its partnerships, and entering international markets.
Gross Profit Margin 71.40%EBIT Margin 4.76% Net Income Margin 4.26% Return on Equity 12.47% Return on Assets 8.88%
So, what is a reasonable forward price target? The company has not provided forward guidance, and analyst coverage does not exist. Forecasting revenue growth in the current tariff environment is difficult, further adding to the price target puzzle.
It is a big plus that Axil can offer products specifically targeted for specific markets. For example, it expects Walmart to be a key contributor to sales for its lower-priced products. Axil revenue has grown at about 130% over the last three years, but was flat last year as the company concentrated on retaining high profit margins while expanding into lower-margin retail sales. Axil can regain its stride and double its revenue over the next 12 months. My price target is $11.50 over the next 12 months.
Risks
Axil is attempting to fill a market void left open in a widely competitive industry inhabited by larger players who could shift attention to Axil's targeted market.
The company imports parts and components from overseas sources, including China, which may hurt revenues and profits due to import tariffs. This will be interesting to watch. CEO Toghraie has made all the right moves since taking the helm at Axil. He recently spoke about the tariff situation as potentially being a plus for Axil. I wonder if he is looking at pursuing military sales, which they are currently not eligible for due to the Chinese exposure.
Consumers know what they want in a hearing protection device and will pick Axil products for advanced hearing protection and ambient hearing capabilities. Without more effort to address this concern, investors will find understanding the difference between competing products challenging.
Conclusion
The new management has transformed Axil from a one-product, unprofitable company into a multiple-product, profitable one seeking to scale revenues. The balance sheet is strong, as are the profitability metrics. Continued execution promises to result in a doubling of the stock price over the next 12 months.