First Solar Inc. (NASDAQ:FSLR)

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First Solar Inc., effective income tax rate (EITR) reconciliation

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
U.S. statutory federal corporate income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%
Non-deductible expenses	2.30%	125.30%	0.70%	1.30%	-9.30%
Changes in valuation allowance	1.20%	258.60%	0.50%	-10.80%	4.80%
Foreign dividend income	1.00%	33.20%	0.50%	1.00%	-5.60%
State tax, net of federal benefit	0.60%	8.10%	0.80%	3.80%	3.40%
Foreign tax rate differential	0.10%	-49.10%	0.80%	2.10%	-14.30%
Change in tax contingency	0.00%	50.30%	0.40%	-20.10%	-5.90%
Return to provision adjustments	-0.40%	-20.50%	-0.90%	0.80%	-12.00%
Tax credits	-1.00%	-147.20%	-0.60%	-2.80%	1.70%
Effect of tax holiday	-1.30%	318.90%	-5.70%	-3.90%	22.40%
Share-based compensation	-1.40%	-11.80%	-0.50%	-0.20%	1.30%
Section 45X production credit	-15.50%	0.00%	0.00%	0.00%	0.00%
Other	0.20%	26.90%	1.10%	-28.80%	-2.90%
Effective income tax rate	6.80%	613.70%	18.10%	-36.60%	4.60%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The effective income tax rate exhibited significant volatility between 2019 and 2023, deviating substantially from the consistent U.S. statutory federal corporate income tax rate of 21%. The rate fluctuated from a low of -36.60% in 2020 to an extreme peak of 613.70% in 2022, before normalizing to 6.80% in 2023.

Analysis of the 2022 Tax Anomaly: The disproportionate spike in the effective income tax rate in 2022 was driven by several massive positive adjustments. The most significant contributors were the effect of tax holidays (318.90%), changes in valuation allowances (258.60%), and non-deductible expenses (125.30%). These were partially offset by substantial tax credits of -147.20%.
Impact of Production Credits and Incentives: Tax credits have historically served as a downward pressure on the effective rate. A notable shift occurred in 2023 with the introduction of the Section 45X production credit, which contributed -15.50% to the tax reconciliation, playing a key role in bringing the effective rate down to 6.80%.
Valuation Allowance and Contingency Trends: Changes in valuation allowances and tax contingencies showed extreme instability. After relatively minor impacts from 2019 to 2021, 2022 saw a combined increase of approximately 308.90% from these two items, indicating a significant reassessment of deferred tax assets or tax positions.
Foreign and State Tax Influences: Foreign tax rate differentials and foreign dividend income remained relatively negligible from 2019 to 2021 and in 2023, but experienced sharp swings in 2022, with a foreign tax rate differential of -49.10% and foreign dividend income of 33.20%. State tax impacts, net of federal benefits, remained consistently low, peaking at 8.10% in 2022 and falling to 0.60% by 2023.

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First Solar Inc., components of deferred tax assets and liabilities

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Long-term contracts	211,974)	23,531)	9,065)	10,813)	11,215)
Net operating losses	119,822)	122,950)	110,979)	110,753)	165,669)
Capitalized research and development	53,146)	32,932)	—)	—)	—)
Inventory	30,787)	1,490)	10,057)	4,587)	4,020)
Accrued expenses	29,503)	28,226)	35,193)	39,458)	134,791)
Compensation	16,451)	13,167)	10,551)	15,806)	22,401)
Tax credits	14,800)	103,260)	86,885)	134,328)	13,127)
Equity in earnings	4,464)	4,172)	4,174)	3,666)	2,906)
Deferred expenses	1,590)	1,735)	1,786)	1,844)	2,177)
Other	28,908)	23,827)	26,028)	33,156)	25,700)
Deferred tax assets, gross	511,445)	355,290)	294,718)	354,411)	382,006)
Valuation allowance	(149,424)	(135,763)	(123,917)	(127,711)	(151,705)
Deferred tax assets, net of valuation allowance	362,021)	219,527)	170,801)	226,700)	230,301)
Property, plant and equipment	(234,394)	(150,477)	(106,361)	(103,324)	(77,794)
Investment in foreign subsidiaries	(6,034)	(5,689)	(15,583)	(21,917)	(5,554)
Acquisition accounting/basis difference	(3,964)	(4,065)	(4,065)	(5,079)	(5,356)
Restricted marketable securities and derivatives	(2,087)	—)	(4,337)	(6,326)	(4,330)
Capitalized interest	(1,294)	(1,331)	(1,338)	(3,097)	(2,199)
Other	(14,200)	(8,214)	(7,654)	(6,529)	(10,790)
Deferred tax liabilities	(261,973)	(169,776)	(139,338)	(146,272)	(106,023)
Net deferred tax assets (liabilities)	100,048)	49,751)	31,463)	80,428)	124,278)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The net deferred tax position exhibited a fluctuating trend between 2019 and 2023, characterized by a significant decline until 2021 followed by a recovery. The net deferred tax assets decreased from 124,278 thousand US dollars in 2019 to a low of 31,463 thousand US dollars in 2021, before rebounding to 100,048 thousand US dollars by the end of 2023.

Gross Deferred Tax Assets (DTA) Trends: Gross deferred tax assets showed a marked increase in the latter part of the period, rising from 294,718 thousand US dollars in 2021 to 511,445 thousand US dollars in 2023. This growth is primarily driven by a substantial surge in long-term contracts, which increased from 11,215 thousand US dollars in 2019 to 211,974 thousand US dollars in 2023. Additionally, capitalized research and development emerged as a contributing factor starting in 2022, reaching 53,146 thousand US dollars by 2023.; Conversely, tax credits experienced significant volatility, peaking at 134,328 thousand US dollars in 2020 before declining to 14,800 thousand US dollars in 2023. Accrued expenses also saw a sharp reduction, dropping from 134,791 thousand US dollars in 2019 to 29,503 thousand US dollars in 2023.
Deferred Tax Liabilities (DTL) Trends: Deferred tax liabilities grew steadily over the five-year period, increasing from 106,023 thousand US dollars in 2019 to 261,973 thousand US dollars in 2023. The primary driver of this increase was the growth in property, plant, and equipment, which expanded from a liability of 77,794 thousand US dollars in 2019 to 234,394 thousand US dollars in 2023, indicating intensified capital investment and associated tax timing differences.
Valuation Allowance and Net Position: The valuation allowance remained relatively stable, fluctuating between 123,917 thousand US dollars and 151,705 thousand US dollars throughout the period. This stability suggests a consistent assessment of the realizability of the deferred tax assets. The net deferred tax assets, net of valuation allowance, mirrored the gross asset trend, ending the period at a high of 362,021 thousand US dollars in 2023.

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First Solar Inc., deferred tax assets and liabilities, classification

US$ in thousands

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
	Deferred tax assets, net	142,819)	78,680)	59,162)	104,099)	130,771)
	Deferred tax liabilities, net	42,771)	28,929)	27,699)	23,671)	6,493)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

An analysis of the deferred tax accounts reveals a period of significant volatility in assets contrasted by a steady growth in liabilities between 2019 and 2023.

Deferred Tax Assets Trends: A U-shaped trajectory is observed in net deferred tax assets. Starting at 130,771 thousand US dollars in 2019, these assets declined consistently over two years to a period low of 59,162 thousand US dollars in 2021. Following this trough, a strong recovery occurred, with assets increasing to 78,680 thousand US dollars in 2022 and peaking at 142,819 thousand US dollars by the end of 2023.
Deferred Tax Liabilities Trends: Net deferred tax liabilities exhibited a consistent upward trend throughout the reported period. A sharp initial increase occurred between 2019 and 2020, where liabilities rose from 6,493 thousand US dollars to 23,671 thousand US dollars. This growth continued at a more moderate pace through 2022, eventually reaching 42,771 thousand US dollars in 2023, representing a substantial cumulative increase from the 2019 baseline.
Net Deferred Tax Position: The company maintained a net deferred tax asset position throughout the five-year period, as deferred tax assets consistently exceeded deferred tax liabilities. However, the margin of this net position narrowed significantly by 2021 due to the simultaneous decrease in assets and increase in liabilities. By 2023, the net position strengthened again, driven primarily by the substantial increase in deferred tax assets.

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First Solar Inc., Financial Data: Reported vs. Adjusted

First Solar Inc., adjustments to financial statements

US$ in thousands

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Adjustment to Total Assets
Total assets (as reported)	10,365,132)	8,251,228)	7,413,746)	7,108,931)	7,515,689)
Less: Noncurrent deferred tax assets, net	142,819)	78,680)	59,162)	104,099)	130,771)
Total assets (adjusted)	10,222,313)	8,172,548)	7,354,584)	7,004,832)	7,384,918)
Adjustment to Total Liabilities
Total liabilities (as reported)	3,677,663)	2,415,173)	1,454,195)	1,588,003)	2,418,922)
Less: Noncurrent deferred tax liabilities, net	42,771)	28,929)	27,699)	23,671)	6,493)
Total liabilities (adjusted)	3,634,892)	2,386,244)	1,426,496)	1,564,332)	2,412,429)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	6,687,469)	5,836,055)	5,959,551)	5,520,928)	5,096,767)
Less: Net deferred tax assets (liabilities)	100,048)	49,751)	31,463)	80,428)	124,278)
Stockholders’ equity (adjusted)	6,587,421)	5,786,304)	5,928,088)	5,440,500)	4,972,489)
Adjustment to Net Income (loss)
Net income (loss) (as reported)	830,777)	(44,166)	468,693)	398,355)	(114,933)
Add: Deferred income tax expense (benefit)	(13,232)	(6,053)	80,360)	11,538)	(60,411)
Net income (loss) (adjusted)	817,545)	(50,219)	549,053)	409,893)	(175,344)

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

An analysis of the financial figures from 2019 to 2023 reveals a consistent divergence between reported and adjusted values, resulting from the removal of deferred tax items. This adjustment process indicates a systematic effort to normalize the balance sheet and income statement by eliminating the impact of deferred tax assets and liabilities.

Balance Sheet Adjustments: Reported total assets consistently exceed adjusted total assets across the five-year period. The variance was most pronounced in 2023, where reported assets were approximately 142.8 million USD higher than adjusted assets. Similarly, reported total liabilities are consistently higher than adjusted liabilities, although the magnitude of this difference is significantly smaller than that observed in total assets. This pattern indicates a net deferred tax asset position, as the removal of these items leads to a corresponding reduction in the adjusted asset base that outweighs the reduction in liabilities.
Impact on Stockholders' Equity: Adjusted stockholders' equity remains lower than reported equity throughout the analyzed period. This reduction is a direct consequence of the net removal of deferred tax assets. The gap between reported and adjusted equity fluctuated over time, reaching a minimum of approximately 31.5 million USD in 2021 and widening to approximately 100 million USD by 2023. This suggests that the net deferred tax position has a measurable impact on the calculated book value of the entity.
Net Income Variance: The removal of deferred taxes produces inconsistent effects on net income, shifting between increasing and decreasing the reported profitability. In 2019 and 2022, the adjusted figures show deeper net losses compared to reported figures. Conversely, in 2020 and 2021, the adjusted net income was higher than the reported amounts. By 2023, the trend reversed again, with adjusted net income falling slightly below the reported figure. These fluctuations suggest that the tax adjustments are tied to volatile periodic tax benefits or expenses rather than a linear trend.

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First Solar Inc., Financial Ratios: Reported vs. Adjusted

First Solar Inc., adjusted financial ratios

	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Net Profit Margin
Reported net profit margin	25.03%	-1.69%	16.03%	14.69%	-3.75%
Adjusted net profit margin	24.64%	-1.92%	18.78%	15.12%	-5.72%
Total Asset Turnover
Reported total asset turnover	0.32	0.32	0.39	0.38	0.41
Adjusted total asset turnover	0.32	0.32	0.40	0.39	0.41
Financial Leverage
Reported financial leverage	1.55	1.41	1.24	1.29	1.47
Adjusted financial leverage	1.55	1.41	1.24	1.29	1.49
Return on Equity (ROE)
Reported ROE	12.42%	-0.76%	7.86%	7.22%	-2.26%
Adjusted ROE	12.41%	-0.87%	9.26%	7.53%	-3.53%
Return on Assets (ROA)
Reported ROA	8.02%	-0.54%	6.32%	5.60%	-1.53%
Adjusted ROA	8.00%	-0.61%	7.47%	5.85%	-2.37%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

The financial performance between 2019 and 2023 is characterized by significant volatility in profitability ratios, concluding with a substantial recovery in the final period. The removal of deferred taxes reveals a measurable divergence in profitability metrics, whereas efficiency and leverage ratios remain largely unaffected by these adjustments.

Profitability and Returns: Net profit margins exhibit a cyclical pattern, shifting from negative territory in 2019 to a peak of 25.03% in 2023. The adjusted net profit margin highlights the influence of deferred taxes, showing a more pronounced deficit in 2019 (-5.72% adjusted vs -3.75% reported) and a higher peak in 2021 (18.78% adjusted vs 16.03% reported). Return on Equity (ROE) and Return on Assets (ROA) mirror this trajectory, both recording losses in 2019 and 2022 before reaching five-year highs in 2023, with an adjusted ROE of 12.41% and an adjusted ROA of 8.00%.
Asset Efficiency: Total asset turnover shows a gradual downward trend, declining from a high of 0.41 in 2019 to a stabilized level of 0.32 in 2022 and 2023. The variance between reported and adjusted turnover ratios is negligible, indicating that deferred tax adjustments do not materially alter the assessment of asset utilization efficiency.
Financial Leverage: The financial leverage ratio followed a U-shaped trend, decreasing from 1.47 in 2019 to a low of 1.24 in 2021, before increasing to 1.55 by 2023. As observed with asset turnover, the adjusted financial leverage ratios are nearly identical to the reported figures, suggesting that deferred tax items have no significant impact on the reported capital structure ratios.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	830,777)	(44,166)	468,693)	398,355)	(114,933)
Net sales	3,318,602)	2,619,319)	2,923,377)	2,711,332)	3,063,117)
Profitability Ratio
Net profit margin¹	25.03%	-1.69%	16.03%	14.69%	-3.75%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	817,545)	(50,219)	549,053)	409,893)	(175,344)
Net sales	3,318,602)	2,619,319)	2,923,377)	2,711,332)	3,063,117)
Profitability Ratio
Adjusted net profit margin²	24.64%	-1.92%	18.78%	15.12%	-5.72%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Net profit margin = 100 × Net income (loss) ÷ Net sales
= 100 × 830,777 ÷ 3,318,602 = 25.03%

² Adjusted net profit margin = 100 × Adjusted net income (loss) ÷ Net sales
= 100 × 817,545 ÷ 3,318,602 = 24.64%

The profitability profile between 2019 and 2023 is characterized by significant volatility, featuring two periods of net losses interspersed with phases of substantial growth, culminating in a peak performance level in 2023.

Net Income Trajectory: Reported net income shifted from a loss of US$114.9 million in 2019 to a period of growth in 2020 and 2021, reaching US$468.7 million. A reversal occurred in 2022 with a reported loss of US$44.2 million, followed by a sharp recovery in 2023, where net income reached a five-year high of US$830.8 million.
Adjusted Net Profit Margin Trends: The adjusted net profit margin demonstrates a volatile but upward long-term trend. After starting at -5.72% in 2019, the margin improved to 15.12% in 2020 and 18.78% in 2021. Despite a decline to -1.92% in 2022, the margin expanded significantly in 2023 to 24.64%, indicating a substantial increase in adjusted profitability relative to revenue.
Analysis of Reported versus Adjusted Metrics: Discrepancies between reported and adjusted figures highlight the impact of non-operational or non-recurring items. In 2019 and 2022, adjusted net profit margins were more negative than reported margins, suggesting that adjustments removed items that had provided a buffer against losses. In contrast, during 2020 and 2021, adjusted margins were higher than reported margins, indicating that specific expenses reduced the reported bottom line. By 2023, the reported net profit margin of 25.03% slightly exceeded the adjusted margin of 24.64%.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net sales	3,318,602)	2,619,319)	2,923,377)	2,711,332)	3,063,117)
Total assets	10,365,132)	8,251,228)	7,413,746)	7,108,931)	7,515,689)
Activity Ratio
Total asset turnover¹	0.32	0.32	0.39	0.38	0.41
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net sales	3,318,602)	2,619,319)	2,923,377)	2,711,332)	3,063,117)
Adjusted total assets	10,222,313)	8,172,548)	7,354,584)	7,004,832)	7,384,918)
Activity Ratio
Adjusted total asset turnover²	0.32	0.32	0.40	0.39	0.41

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 3,318,602 ÷ 10,365,132 = 0.32

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 3,318,602 ÷ 10,222,313 = 0.32

Analysis of asset utilization metrics reveals a period of significant balance sheet expansion coupled with a decline in operational efficiency ratios between 2019 and 2023.

Asset Base Expansion: Total assets, both reported and adjusted, remained relatively stable from 2019 through 2021, experiencing a slight contraction in 2020. A significant growth phase began in 2022, with reported total assets increasing from US$ 7.41 billion in 2021 to US$ 10.37 billion by December 31, 2023. This indicates a substantial increase in the company's resource investment over the final two years of the observed period.
Adjusted Total Asset Turnover Trends: The adjusted total asset turnover ratio exhibits a downward trajectory. The ratio remained resilient between 2019 and 2021, fluctuating marginally between 0.41 and 0.40. However, a sharp decline is observed in 2022, where the ratio fell to 0.32, a level that persisted through the end of 2023. This trend suggests that revenue growth has not kept pace with the rapid expansion of the asset base.
Comparative Analysis of Reported and Adjusted Metrics: Reported total assets consistently exceed adjusted total assets across all periods, though the variance remains proportional. The adjusted total asset turnover ratio provides a slightly higher efficiency reading than the reported ratio during the 2020 and 2021 fiscal years. By 2022 and 2023, however, both reported and adjusted turnover ratios converged at 0.32, confirming a standardized decrease in asset productivity.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Total assets	10,365,132)	8,251,228)	7,413,746)	7,108,931)	7,515,689)
Stockholders’ equity	6,687,469)	5,836,055)	5,959,551)	5,520,928)	5,096,767)
Solvency Ratio
Financial leverage¹	1.55	1.41	1.24	1.29	1.47
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets	10,222,313)	8,172,548)	7,354,584)	7,004,832)	7,384,918)
Adjusted stockholders’ equity	6,587,421)	5,786,304)	5,928,088)	5,440,500)	4,972,489)
Solvency Ratio
Adjusted financial leverage²	1.55	1.41	1.24	1.29	1.49

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 10,365,132 ÷ 6,687,469 = 1.55

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 10,222,313 ÷ 6,587,421 = 1.55

Analysis of the balance sheet structure from 2019 to 2023 reveals a period of fluctuating financial leverage occurring alongside a significant expansion of the asset base. Total assets experienced a slight contraction in 2020 before entering a phase of sustained growth, increasing from 7.1 billion US dollars in 2020 to over 10.3 billion US dollars by the end of 2023. Stockholders' equity followed a generally positive trajectory, rising from approximately 5.1 billion US dollars in 2019 to 6.7 billion US dollars in 2023.

Adjusted Financial Leverage Trends: The adjusted financial leverage ratio exhibited a V-shaped progression over the five-year period. A downward trend is observed between 2019 and 2021, where the ratio declined from 1.49 to a low of 1.24, indicating a reduction in the proportion of assets funded by debt relative to equity. This trend reversed after 2021, with the ratio ascending to 1.41 in 2022 and reaching 1.55 by December 31, 2023, marking the highest leverage level in the analyzed period.
Comparative Analysis of Reported and Adjusted Metrics: A minimal variance exists between reported and adjusted financial leverage. While a slight discrepancy was present in 2019—with the adjusted ratio at 1.49 compared to the reported 1.47—the figures became identical from 2020 through 2023. This suggests that the adjustments applied to total assets and stockholders' equity had a negligible impact on the resulting leverage ratio during the latter four years of the period.
Asset Growth and Leverage Correlation: The increase in financial leverage observed from 2021 to 2023 coincided with a rapid acceleration in total asset growth. Although stockholders' equity increased during this time, the growth in total assets—which rose by approximately 40% between 2021 and 2023—outpaced the growth in equity, thereby driving the increase in the leverage ratio to 1.55.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	830,777)	(44,166)	468,693)	398,355)	(114,933)
Stockholders’ equity	6,687,469)	5,836,055)	5,959,551)	5,520,928)	5,096,767)
Profitability Ratio
ROE¹	12.42%	-0.76%	7.86%	7.22%	-2.26%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	817,545)	(50,219)	549,053)	409,893)	(175,344)
Adjusted stockholders’ equity	6,587,421)	5,786,304)	5,928,088)	5,440,500)	4,972,489)
Profitability Ratio
Adjusted ROE²	12.41%	-0.87%	9.26%	7.53%	-3.53%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ ROE = 100 × Net income (loss) ÷ Stockholders’ equity
= 100 × 830,777 ÷ 6,687,469 = 12.42%

² Adjusted ROE = 100 × Adjusted net income (loss) ÷ Adjusted stockholders’ equity
= 100 × 817,545 ÷ 6,587,421 = 12.41%

The financial performance between 2019 and 2023 is characterized by significant volatility in net income and a corresponding fluctuation in Return on Equity (ROE). While stockholders' equity has maintained a general upward trajectory, increasing from approximately 5.1 billion US$ in 2019 to 6.7 billion US$ by 2023, the profitability ratios have experienced sharp swings, including two periods of negative returns.

Adjusted ROE Trends: The Adjusted ROE exhibits a volatile trajectory, starting at -3.53% in 2019 before recovering to 7.53% in 2020 and peaking at 9.26% in 2021. A downturn occurred in 2022, where the ratio fell to -0.87%, reflecting a period of adjusted net losses. A substantial recovery was realized in 2023, with the Adjusted ROE reaching its period high of 12.41%.
Comparison of Reported and Adjusted Performance: A divergence between reported and adjusted metrics is most evident in the early years of the analysis. In 2019 and 2021, the Adjusted ROE showed greater variance than the Reported ROE, suggesting that specific non-recurring items or accounting adjustments significantly influenced the reported figures. However, by 2023, the Reported ROE (12.42%) and Adjusted ROE (12.41%) converged, indicating a near-total alignment between reported earnings and adjusted performance.
Equity and Profitability Correlation: The steady growth in adjusted stockholders' equity, rising from 4.97 billion US$ in 2019 to 6.59 billion US$ in 2023, provided a stable capital base despite fluctuations in earnings. The sharp increase in Adjusted ROE in 2023 was driven primarily by a surge in adjusted net income to 817.5 million US$, rather than a contraction in the equity base, signaling a genuine improvement in operational efficiency and profitability.

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	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
As Reported
Selected Financial Data (US$ in thousands)
Net income (loss)	830,777)	(44,166)	468,693)	398,355)	(114,933)
Total assets	10,365,132)	8,251,228)	7,413,746)	7,108,931)	7,515,689)
Profitability Ratio
ROA¹	8.02%	-0.54%	6.32%	5.60%	-1.53%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income (loss)	817,545)	(50,219)	549,053)	409,893)	(175,344)
Adjusted total assets	10,222,313)	8,172,548)	7,354,584)	7,004,832)	7,384,918)
Profitability Ratio
Adjusted ROA²	8.00%	-0.61%	7.47%	5.85%	-2.37%

Based on: 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31).

2023 Calculations

¹ ROA = 100 × Net income (loss) ÷ Total assets
= 100 × 830,777 ÷ 10,365,132 = 8.02%

² Adjusted ROA = 100 × Adjusted net income (loss) ÷ Adjusted total assets
= 100 × 817,545 ÷ 10,222,313 = 8.00%

The financial performance between 2019 and 2023 is characterized by significant volatility in profitability contrasted with a consistent upward trajectory in the asset base. The Adjusted Return on Assets (ROA) mirrors this volatility, transitioning from negative yields to a peak efficiency level by the end of the analyzed period.

Adjusted Net Income Trends: Profitability exhibited sharp fluctuations over the five-year period. A substantial adjusted loss of 175.3 million USD in 2019 was followed by a strong recovery in 2020 and 2021, with adjusted net income reaching 549.1 million USD. A brief reversal occurred in 2022 with an adjusted loss of 50.2 million USD, before a significant surge in 2023 to 817.5 million USD, the highest value in the sequence.
Asset Base Expansion: Adjusted total assets demonstrated a general growth trend, increasing from 7.38 billion USD in 2019 to 10.22 billion USD in 2023. While there was a slight contraction in 2020 to 7.00 billion USD, the subsequent growth accelerated sharply between 2022 and 2023, representing an increase of approximately 25% in a single fiscal year.
Adjusted Return on Assets (ROA) Analysis: The Adjusted ROA followed the trajectory of adjusted net income, beginning at -2.37% in 2019. Efficiency improved significantly to 5.85% in 2020 and peaked at 7.47% in 2021. Despite a dip to -0.61% in 2022, the metric recovered to reach its highest point of 8.00% in 2023, indicating an improved capability to generate earnings from the expanded asset base.
Comparison of Reported and Adjusted Metrics: A divergence is observed between reported and adjusted ROA in the earlier years, with adjusted figures showing deeper losses in 2019 (-2.37% vs -1.53%) and higher gains in 2021 (7.47% vs 6.32%). By 2023, these two metrics converged almost entirely, with reported ROA at 8.02% and adjusted ROA at 8.00%, suggesting a reduction in the impact of non-recurring or adjusting items on the bottom line.

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