Illumina Inc. (NASDAQ:ILMN)

Current Provision Trend

The current income tax provision showed significant variability over the five-year period. It began at 126 million USD in 2016, nearly tripled to 331 million USD in 2017, then dropped sharply to 130 million USD in 2018. The provision then experienced a slight decrease to 123 million USD in 2019, followed by a notable decline to 83 million USD in 2020. This indicates considerable fluctuations, with a peak in 2017 and a downward trend thereafter.

Deferred Expense (Benefit) Analysis

The deferred income tax component displayed contrasting behaviors during the period. It started modestly at 7 million USD in 2016, increased substantially to 34 million USD in 2017, then shifted to a negative value of -18 million USD in 2018, indicating a deferred tax benefit. In 2019, it reverted to a small expense of 5 million USD, followed by a substantial increase to 117 million USD in 2020. These changes reflect variability in deferred tax liabilities and assets, with a notable benefit recorded in 2018 and a significant expense rebound in 2020.

Provision for Income Taxes Observation

The total provision for income taxes, combining current and deferred elements, exhibited pronounced fluctuations. Starting at 133 million USD in 2016, it surged to 365 million USD in 2017, dropped to 112 million USD in 2018, then rose slightly to 128 million USD in 2019 and increased sharply to 200 million USD in 2020. The peak in 2017 corresponds with the highest current provision, while the sizable increase in 2020 is linked to the large deferred expense recorded that year. This pattern suggests significant variations in tax expense attributable to both current operations and deferred tax adjustments.

Overall Insights

The data reveals substantial volatility in current, deferred, and total income tax provisions over the observed period. The spike in 2017 across all measures likely reflects unusual tax circumstances or changes in tax regulations. The negative deferred amount in 2018 indicates a temporary tax benefit, which did not persist in subsequent years. The large deferred tax expense in 2020 suggests major adjustments affecting future tax obligations. The trends indicate the company's income tax expense is subject to considerable fluctuation influenced by both operational performance and changes in deferred tax positions.

U.S. Federal Statutory Tax Rate

The rate remained consistent at 35% for 2016 and 2017, before decreasing significantly to 21% in 2018 and maintaining that level through 2020. This reduction reflects a notable tax policy change effective from 2018 onward.

Effective Income Tax Rate Before Impact of U.S. Tax Reform

The effective tax rate before accounting for the U.S. tax reform shows a decreasing trend from 23.72% in 2016 down to 11.3% in 2018 and slightly increasing to 11.45% in 2019. However, a substantial increase to 23.36% occurred in 2020. This pattern suggests a fluctuating effective tax burden independent of reform effects, with a pronounced rise in 2020.

Effective Income Tax Rate

The overall effective income tax rate closely follows the trend of the tax rate before reform impact, except for 2017 where it jumps back to 35%, aligning with the statutory rate that year. There is a sharp decline in 2018 and 2019, reflecting tax reform effects. The rate reverts upward noticeably to 23.36% in 2020, indicating an increased tax expense relative to prior years.

General Insights

The data reveals a clear influence of tax reform starting in 2018, reducing the statutory tax rate and lowering the effective tax rate initially. However, the effective tax rate exhibits volatility, particularly in 2020, suggesting other factors beyond statutory rates impact tax expenses. The alignment of the effective tax rate with statutory rates in certain years points to varying impacts from deductions, credits, or other tax adjustments over time.

Net operating losses and tax credits

Net operating losses fluctuated over the period, decreasing slightly from 20 million in 2016 to 18 million in 2017, rising to 26 million in 2018, then dipping to 21 million in 2019 before returning to 26 million in 2020. Tax credits showed a consistent upward trend, increasing steadily from 43 million in 2016 to 70 million by 2020.

Other accruals and reserves

This category exhibited variability, starting at 24 million in 2016, maintaining a steady 25-28 million through 2017 and 2018, plunging to 12 million in 2019, and recovering to 21 million in 2020.

Stock compensation

Stock compensation costs demonstrated a downward trend, halving from 38 million in 2016 to 19 million in 2017, then stabilizing between 17 and 20 million for the remaining years.

Deferred rent and cost sharing adjustment

Deferred rent declined from 38 million in 2016 to 28-30 million in 2017-2018, and data is missing for later periods. Cost sharing adjustment decreased from 32 million in 2016 to 21 million by 2017 and remained stable at 21 million through 2019, with no data for 2020.

Other amortization

Other amortization expenses fluctuated mildly, starting at 16 million in 2016, decreasing to 12-13 million in 2017 and 2018, before rising again to 16 and 17 million in 2019 and 2020, respectively.

Lease-related liabilities and assets

Obligations under financing leases were introduced in 2017 at 27 million, spiked to 70 million in 2018, with no data in subsequent years. Operating lease liabilities appeared from 2019 onward, with significant amounts of 158 million in 2019 and 156 million in 2020. Correspondingly, operating lease right-of-use assets were recorded as negative values starting in 2019 (-111 million) and slightly less negative in 2020 (-108 million), reflecting the implementation of lease accounting standards.

Investments

Investments showed mixed trends. Initially, positive values of 13 million in 2017 diminished sharply to minimal levels (1-2 million) in 2018-2019, followed by a large negative adjustment of -137 million in 2020, possibly reflecting impairment, disposals, or reclassifications.

Other items

The 'Other' category started at 38 million in 2016, declined to 26-28 million through 2017-2018, then rose substantially to 45 million in 2019 and further to 53 million in 2020. In contrast, the negative 'Other' values showed small fluctuations around -3 to -6 million over the years.

Gross deferred tax assets and related allowances

Gross deferred tax assets grew steadily from 249 million in 2016 to 360 million in 2020, indicating an increase in deductible temporary differences or carryforwards. However, the valuation allowance on these assets exhibited volatility, increasing in magnitude from -18 million in 2016 to a notable -81 million in 2020 after minor fluctuations, suggesting increased uncertainty or reduced realizability of deferred tax assets in the most recent year.

Net deferred tax assets (liabilities)

Deferred tax assets rose from 231 million in 2016 up to 345 million in 2019, then dropped to 279 million in 2020. Deferred tax liabilities steadily increased in absolute terms from -108 million (2016) to -332 million (2020). The net deferred tax position decreased sharply from a positive 122 million in 2016 to a negative 53 million in 2020, indicating a shift from net deferred tax assets to net liabilities over the period.

Purchased intangible amortization and other liabilities

Purchased intangible amortization showed a consistent negative impact ranging between -53 million in 2016 and stabilized around -27 million in later years. Convertible debt decreased in liability from -37 million in 2016 to -20 million in 2020, suggesting partial repayment or refinancing activity. Property and equipment liabilities fluctuated negatively, reaching their peak in 2018 with -94 million, then decreasing in magnitude through 2020.

Deferred tax assets, net

Over the five-year period, there is a clear declining trend in deferred tax assets, net, which decreased from $123 million in 2016 to $20 million in 2020. This represents a significant reduction, indicating a diminishing amount of deferred tax assets recorded on the balance sheet. The drop is notably steep between 2019 and 2020, where the figure fell from $64 million to $20 million, suggesting either the utilization of deferred tax assets or changes in tax positions affecting their recognition.

Deferred tax liabilities

Deferred tax liabilities exhibit a fluctuating pattern with some missing observations. Starting at $1 million in 2016, the data for 2017 and 2018 is unavailable, followed by a return to $1 million in 2019. A significant increase to $73 million is observed in 2020, representing a substantial rise compared to previous years. This sharp increase points to the emergence or recognition of new deferred tax liabilities or adjustments in prior period assessments.

Overall trend and insights

The data reveals a contrasting movement between deferred tax assets and liabilities over the analyzed period. While deferred tax assets have been steadily decreasing, deferred tax liabilities remained low until 2019 and then surged markedly in 2020. This divergence could imply changes in the company’s tax strategies, asset base, or underlying temporary differences. The substantial growth in deferred tax liabilities coupled with the decline in deferred tax assets could impact future tax expenses and cash flows. Further investigation into the causes of the dramatic changes in 2020 is warranted to understand their implications on the financial position and tax planning.

Total Assets

The reported total assets showed a consistent upward trend from 4,281 million USD in 2016 to 7,585 million USD in 2020, representing significant growth over the five-year period. The adjusted total assets mirrored this trend closely, ranging from 4,157 million USD in 2016 to 7,565 million USD in 2020, indicating minimal difference between reported and adjusted values.

Total Liabilities

The reported total liabilities increased from 1,966 million USD in 2016 to a peak of 3,053 million USD in 2018, followed by a decline to 2,891 million USD in 2020. Adjusted total liabilities tracked reported figures tightly, with a slight reduction in 2019 and 2020 relative to reported liabilities, notably dropping from 3,053 million USD in 2018 to 2,818 million USD in 2020.

Stockholders’ Equity

The reported total stockholders’ equity experienced steady growth over the period, rising from 2,197 million USD in 2016 to 4,694 million USD in 2020. The adjusted equity followed a similar upward trajectory but consistently remained somewhat lower than reported equity in the earlier years before surpassing it in 2020, reaching 4,747 million USD, which suggests adjustments may have added value to equity in the later period.

Net Income Attributable to Stockholders

Reported net income showed an overall positive trend, increasing from 463 million USD in 2016 to a peak of 1,002 million USD in 2019, before declining to 656 million USD in 2020. In contrast, the adjusted net income followed a similar pattern but with slightly higher values, especially notable in 2017 and 2020, where adjusted net income exceeded reported figures, suggesting the adjustments had a positive impact on net income during those years.

Insights and Patterns

The company demonstrated solid asset growth and equity improvement across the five years, with assets nearly doubling. The temporary peak in liabilities in 2018 followed by a decline suggests either repayment or restructuring of obligations. The divergence between reported and adjusted figures in liabilities and net income toward the later years may reflect accounting treatments related to income tax adjustments. The decline in net income in 2020 contrasts with the continued increase in equity, implying other factors such as retained earnings or issuance of equity may have supported equity growth despite lower profitability.

Net Profit Margin

The reported net profit margin showed an upward trend from 19.29% in 2016 to a peak of 28.28% in 2019, followed by a notable decline to 20.25% in 2020. The adjusted net profit margin exhibited a similar pattern, increasing from 19.57% in 2016 to 28.42% in 2019, then decreasing to 23.87% in 2020. Overall, profitability improved until 2019 before experiencing a downturn in the final year.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios demonstrated a consistent downward trend over the five-year period. Reported ratios declined from 0.56 in 2016 to 0.43 in 2020, while adjusted ratios moved from 0.58 to 0.43 over the same timeframe. This indicates a steady reduction in asset efficiency or revenue generation per unit of asset.

Financial Leverage

Reported financial leverage decreased gradually from 1.95 in 2016 to 1.59 in 2019, with a slight increase to 1.62 in 2020. Adjusted financial leverage mirrored this trend, reducing from 2.00 in 2016 to 1.59 in 2020. The overall decline suggests a reduction in reliance on debt relative to equity, particularly through 2019, stabilizing at a lower level thereafter.

Return on Equity (ROE)

Reported ROE increased from 21.06% in 2016, peaked at 26.41% in 2017, then gradually declined to 13.98% in 2020. Adjusted ROE followed a similar trend, rising from 22.62% in 2016 to 28.56% in 2017 before dropping to 16.28% in 2020. The decline in ROE during the final years reflects diminished profitability or capital efficiency.

Return on Assets (ROA)

Reported ROA improved from 10.81% in 2016 to 13.7% in 2019 before falling to 8.65% in 2020. The adjusted ROA showed a comparable pattern, increasing from 11.29% in 2016 to 13.89% in 2019, then decreasing to 10.22% in 2020. This trend signals increasing returns generated by assets until 2019, followed by a reduction in asset profitability.

The financial data reveals notable fluctuations in both reported and adjusted net incomes as well as net profit margins over the five-year period ending in 2020.

Net Income Trends

Reported net income attributable to stockholders increased steadily from 463 million USD in 2016 to a peak of 1002 million USD by the end of 2019. However, there was a subsequent decline in 2020, with net income falling to 656 million USD. Adjusted net income follows a similar trajectory, beginning at 469 million USD in 2016 and climbing to 1007 million USD in 2019, followed by a less pronounced decrease to 773 million USD in 2020. Overall, both reported and adjusted figures demonstrate growth through 2019, with a notable setback in the final year.

Net Profit Margin Trends

Reported net profit margin showed an upward trend from 19.29% in 2016 to a high of 28.28% in 2019, before dropping significantly to 20.25% in 2020. Adjusted net profit margin exhibits a comparable pattern, rising from 19.57% in 2016 to a peak of 28.42% in 2019, and then declining to 23.87% in 2020. Despite the decrease in 2020, adjusted margins remained higher than reported margins, indicating some positive effect of adjustments during that year.

Comparative Insights

Throughout the period, adjusted net income and net profit margins consistently exceeded reported figures, though the differences narrowed in 2018 and 2019. The peak performance in 2019 is evident across all metrics. The decline in 2020 suggests potential external or internal challenges impacting profitability, with adjusted metrics suggesting a partial mitigation of these effects.

Total Assets Trend

The total assets, both reported and adjusted for deferred income tax, displayed a consistent upward trajectory over the five-year period. Reported total assets increased from 4,281 million US dollars in 2016 to 7,585 million US dollars in 2020, reflecting significant asset growth. Adjusted total assets followed a similar pattern, rising from 4,157 million to 7,565 million US dollars, indicating that deferred tax adjustments had a relatively small impact on the total asset valuation.

Total Asset Turnover Trend

The total asset turnover ratio showed a decreasing trend in both reported and adjusted figures. Reported total asset turnover declined from 0.56 times in 2016 to 0.43 times in 2020. Adjusted total asset turnover closely mirrored this pattern, decreasing from 0.58 times to 0.43 times over the same period. This decline indicates a reduction in the efficiency with which the company utilized its assets to generate revenue over the years.

Comparison Between Reported and Adjusted Figures

The adjusted total assets are slightly lower than the reported figures each year, reflecting the impact of deferred income tax adjustments. However, the relative difference remains small and fairly consistent. Similarly, the adjusted total asset turnover ratios are marginally higher in the early years but converge with the reported figures by 2020, suggesting that deferred tax adjustments have minimal effect on the company's asset utilization efficiency measures in recent periods.

Overall Insights

The company has experienced consistent growth in total assets over the analyzed period, which indicates expansion or increased capital investment. However, the decreasing asset turnover ratios signal a decline in asset productivity or revenue generation relative to asset base size. This may warrant further analysis to understand whether the decline is due to changes in market conditions, operational efficiency, or strategic investments that have not yet translated into proportional revenue increases.

The financial data over the five-year period reveals consistent growth in both reported and adjusted total assets. Reported total assets increased from US$4,281 million in 2016 to US$7,585 million in 2020, while adjusted total assets rose from US$4,157 million to US$7,565 million in the same timeframe. This steady upward trend indicates expansion in the company’s asset base.

Total stockholders’ equity, both reported and adjusted, exhibited significant increases throughout the period. Reported equity grew from US$2,197 million in 2016 to US$4,694 million in 2020, and adjusted equity showed a similar rise from US$2,075 million to US$4,747 million. The growth in equity aligns with the increase in assets, suggesting retention of earnings or additional equity injections contributing to stronger financial stability.

Financial leverage ratios, which reflect the relationship between total assets and equity, demonstrated a declining trend from 2016 through 2019, followed by relative stabilization in 2020. The reported financial leverage decreased from 1.95 in 2016 to 1.59 in 2019, slightly increasing to 1.62 in 2020. Adjusted financial leverage mirrored this pattern, declining from 2.00 in 2016 to 1.59 in 2019 and maintaining that level in 2020. The overall reduction in leverage ratios points to a gradual decrease in reliance on debt financing relative to equity, improving the company's solvency position.

Comparing reported and adjusted figures, differences are minor but consistent. Adjusted total assets and equity are slightly lower than reported values each year, reflecting adjustments likely related to deferred income taxes or other accounting considerations. The close alignment between reported and adjusted financial leverage ratios indicates that the adjustments have minimal impact on the overall leverage profile.

In summary, the company has demonstrated strong asset and equity growth, accompanied by a prudent reduction in financial leverage over the examined period. These trends suggest an improving financial position characterized by expanding asset base, increased shareholder equity, and moderated leverage risk.

The financial data reflects several notable trends over the five-year period ending in 2020. The net income figures, both reported and adjusted, show a pattern of growth from 2016 through 2019, followed by a decline in 2020. Specifically, reported net income increased steadily from $463 million in 2016 to a peak of $1,002 million in 2019 before dropping to $656 million in 2020. Adjusted net income exhibits a similar trajectory, rising from $469 million in 2016 to $1,007 million in 2019 and then decreasing to $773 million in 2020. This indicates that while growth was sustained for the majority of the period, 2020 saw a contraction in profitability.

In terms of stockholders’ equity, both reported and adjusted figures consistently rose each year. Reported equity increased from $2,197 million in 2016 to $4,694 million in 2020, while the adjusted equity rose from $2,075 million to $4,747 million over the same timeframe. This steady increase suggests ongoing capital accumulation and potentially retained earnings contributing to the equity base.

Regarding return on equity (ROE), both reported and adjusted ROE percentages grew initially but then experienced a decline in the final year. Reported ROE moved from 21.06% in 2016 to a high of 26.41% in 2017, then tapered to 21.72% in 2019 before a significant drop to 13.98% in 2020. Adjusted ROE follows a similar pattern, peaking at 28.56% in 2017 and declining to 16.28% in 2020. The decline in ROE in 2020, despite the increase in equity, reflects the reduction in net income and suggests a decrease in profitability efficiency relative to the equity base.

Overall, the data reveals strong financial performance growth from 2016 through 2019, highlighted by increasing net income, equity, and ROE. However, 2020 presents a notable downturn in profitability and returns, despite continued growth in equity, indicating external or internal factors negatively impacting income generation in that final year.

Net Income Trends

The reported net income attributable to stockholders exhibited a general upward trend from 2016 through 2019, rising from $463 million to $1,002 million. However, in 2020, there was a noticeable decline to $656 million. The adjusted net income followed a similar pattern, increasing from $469 million in 2016 to a peak of $1,007 million in 2019 before decreasing to $773 million in 2020. This indicates that adjustments had a moderating effect, resulting in consistently slightly higher net income figures compared to reported amounts, particularly evident in 2020.

Total Assets Trends

Reported total assets demonstrated continuous growth over the five-year period, increasing from $4,281 million in 2016 to $7,585 million in 2020. Similarly, adjusted total assets followed this increasing trend, growing from $4,157 million to $7,565 million in the same timeframe. The adjusted total assets were consistently slightly lower than reported totals, reflecting adjustments made, but the growth trajectory remained stable and positive throughout the period.

Return on Assets (ROA) Trends

Reported ROA fluctuated between 10.81% and 13.81% from 2016 to 2019, peaking in 2017 before declining slightly in 2018 and rising again in 2019. However, there was a marked decrease in 2020 to 8.65%. In contrast, adjusted ROA showed higher values in each year and a generally smoother pattern, ranging from 11.29% in 2016 to a high of 14.7% in 2017, followed by a more gradual decrease to 10.22% in 2020. The adjusted ROA suggests a stronger asset efficiency compared to reported figures, with less volatility and a less severe decline in 2020.

Overall Analysis

The data indicate robust growth in income and asset base through 2019, followed by a decline in profitability metrics in 2020 despite continued asset growth. Adjustments consistently result in higher net income and ROA figures, implying favorable impacts from deferred income tax and other accounting adjustments. The decline in net income and ROA in 2020 may reflect external challenges impacting profitability, despite ongoing asset expansion. The relatively smaller decline in adjusted figures suggests that the adjustments may help to somewhat mitigate the appearance of reduced operational performance.