Microchip Technology Inc. (NASDAQ:MCHP)

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

Microchip Technology Inc., effective income tax rate (EITR) reconciliation

		Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
	Statutory federal tax rate	21.00%	21.00%	21.00%	21.00%	31.55%	35.00%
	Effective tax rate	13.29%	-2.92%	-279.39%	-74.03%	65.36%	-90.00%

The fiscal period from 2017 to 2022 is characterized by a marked divergence between the statutory federal tax rate and the effective tax rate. While the statutory rate followed a clear downward trajectory before stabilizing, the effective tax rate demonstrated extreme volatility, frequently shifting between significant tax benefits and tax expenses.

Statutory Federal Tax Rate Trends: A steady decrease in the statutory federal tax rate was observed from March 31, 2017, to March 31, 2019, moving from 35.00% to 21.00%. Following this decline, the rate remained constant at 21.00% for the remainder of the analyzed period through March 31, 2022.
Effective Tax Rate Volatility: The effective tax rate exhibited significant instability, characterized by several years of negative values, indicating net tax benefits. A tax benefit was recorded in 2017 (-90.00%), followed by a sharp reversal to 65.36% in 2018, which substantially exceeded the statutory rate. This was followed by further negative rates in 2019 (-74.03%), 2020 (-279.39%), and 2021 (-2.92%), before returning to a positive rate of 13.29% in 2022.
Analysis of Rate Variance: The variance between the statutory and effective rates reached its peak in 2020, where the effective rate of -279.39% stood in stark contrast to the 21.00% statutory rate. This suggests the presence of substantial non-recurring tax adjustments or credits. By March 31, 2022, the effective tax rate of 13.29% showed a trend toward normalization, though it remained approximately 7.71 percentage points below the statutory benchmark.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

Microchip Technology Inc., components of deferred tax assets and liabilities

US$ in thousands

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
Deferred income on shipments to distributors	—)	—)	—)	—)	39,100)	55,674)
Accrued expenses	81,600)	83,600)	80,400)	91,400)	91,200)	110,347)
Capital loss carryforward	9,800)	6,300)	9,400)	9,600)	10,600)	12,927)
Deferred revenue	90,400)	—)	—)	—)	—)	—)
Income tax credits	306,600)	331,100)	351,100)	376,500)	178,400)	243,049)
Intangible assets	1,479,900)	1,581,500)	1,694,800)	1,608,100)	—)	—)
Inventory valuation	26,800)	46,000)	48,500)	45,000)	10,700)	14,608)
Lease liabilities	36,100)	37,100)	20,200)	—)	—)	—)
Net operating loss carryforward	77,000)	68,000)	74,800)	94,300)	101,100)	91,606)
Property, plant and equipment	40,800)	32,700)	31,700)	23,600)	25,700)	59,700)
Share-based compensation	45,800)	46,500)	39,800)	42,400)	31,400)	42,547)
Other	5,500)	17,400)	14,000)	12,600)	—)	—)
Gross deferred tax assets	2,200,300)	2,250,200)	2,364,700)	2,303,500)	488,200)	630,458)
Valuation allowances	(290,300)	(290,300)	(303,500)	(332,100)	(204,500)	(210,120)
Deferred tax assets, net of valuation allowances	1,910,000)	1,959,900)	2,061,200)	1,971,400)	283,700)	420,338)
Convertible debt	(22,700)	(53,900)	(228,700)	(279,300)	(304,400)	(606,674)
Intangible assets	(92,400)	(158,100)	(365,100)	(721,000)	(66,600)	(147,543)
ROU assets	(33,600)	(34,500)	(24,300)	—)	—)	—)
Other	(4,000)	(8,100)	(13,100)	—)	(18,300)	(6,296)
Deferred tax liabilities	(152,700)	(254,600)	(631,200)	(1,000,300)	(389,300)	(760,513)
Net deferred tax asset (liability)	1,757,300)	1,705,300)	1,430,000)	971,100)	(105,600)	(340,175)

The financial trajectory of the deferred tax position reveals a significant shift from a net deferred tax liability to a substantial net deferred tax asset over the six-year period ending March 31, 2022. The net deferred tax position transitioned from a liability of 340.1 million USD in 2017 to a net asset of 1.757 billion USD by 2022, representing a fundamental change in the balance sheet composition regarding future tax obligations and benefits.

Gross Deferred Tax Assets (DTAs): A substantial increase in gross deferred tax assets is observed, growing from 630.5 million USD in 2017 to 2.200 billion USD in 2022. The primary catalyst for this growth occurred in 2019, coinciding with the introduction of 1.608 billion USD in intangible assets as a DTA component. Other consistent contributors include income tax credits, which remained significant throughout the period, fluctuating between 178.4 million USD and 376.5 million USD. Net operating loss carryforwards showed a general downward trend, decreasing from 91.6 million USD in 2017 to 77.0 million USD in 2022.
Deferred Tax Liabilities (DTLs): Deferred tax liabilities exhibited high volatility before trending sharply downward. After peaking at 1.000 billion USD in 2019, liabilities decreased to 152.7 million USD by 2022. This reduction is largely attributed to the liquidation or settlement of convertible debt, which dropped from a liability of 606.7 million USD in 2017 to 22.7 million USD in 2022. Additionally, deferred tax liabilities related to intangible assets peaked at 721.0 million USD in 2019 before declining to 92.4 million USD by 2022.
Valuation Allowances and Net Realizability: Valuation allowances remained relatively stable, ranging between 204.5 million USD and 332.1 million USD. While these allowances offset a portion of the gross DTAs, the scale of the gross assets grew at a much faster rate, leading to a marked increase in the net deferred tax assets. The net DTAs, after accounting for valuation allowances, rose from 420.3 million USD in 2017 to 1.910 billion USD in 2022.
Emerging Balance Sheet Items: New components emerged in the later years of the analysis. Deferred revenue appeared as an asset of 90.4 million USD in 2022. Similarly, lease liabilities and Right-of-Use (ROU) assets began appearing in 2020, reflecting changes in accounting standards or lease structures, with ROU assets creating a liability of 33.6 million USD by March 31, 2022.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

Microchip Technology Inc., deferred tax assets and liabilities, classification

US$ in thousands

		Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
	Non-current deferred tax assets	1,797,100)	1,749,200)	1,748,500)	1,677,200)	100,200)	68,870)
	Non-current deferred tax liability	39,800)	43,900)	318,500)	706,100)	205,800)	409,045)

A significant structural shift in the deferred tax position occurred between 2017 and 2022, transitioning from a net deferred tax liability to a substantial net deferred tax asset. This evolution is characterized by a dramatic increase in deferred tax assets coupled with a progressive elimination of deferred tax liabilities over the analyzed period.

Non-current Deferred Tax Assets: A substantial expansion in non-current deferred tax assets is observed, particularly between March 31, 2018, and March 31, 2019, where values rose from 100,200 thousand US$ to 1,677,200 thousand US$. Following this sharp increase, the asset levels stabilized, maintaining a consistent range between 1.74 billion and 1.80 billion US$ through March 31, 2022.
Non-current Deferred Tax Liabilities: The non-current deferred tax liability profile exhibited significant volatility. After an initial decrease in 2018 and a peak of 706,100 thousand US$ in 2019, a consistent downward trend emerged. By March 31, 2022, the liability was reduced to 39,800 thousand US$, representing a near-total elimination of the liability compared to the 2019 peak.
Net Deferred Tax Position: The net tax position inverted fundamentally during the 2019 fiscal year. From 2017 to 2018, the company maintained a net deferred tax liability position. Starting in 2019, this shifted to a net asset position, which grew progressively as assets stabilized and liabilities declined. By March 31, 2022, the net deferred tax asset position reached its highest point in the period, driven by the convergence of peak asset levels and minimum liability levels.

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Microchip Technology Inc., Financial Data: Reported vs. Adjusted

Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

Microchip Technology Inc., adjustments to financial statements

US$ in thousands

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
Adjustment to Total Assets
Total assets (as reported)	16,199,500)	16,478,800)	17,426,100)	18,350,000)	8,257,200)	7,686,881)
Less: Noncurrent deferred tax assets, net	1,797,100)	1,749,200)	1,748,500)	1,677,200)	100,200)	68,870)
Total assets (adjusted)	14,402,400)	14,729,600)	15,677,600)	16,672,800)	8,157,000)	7,618,011)
Adjustment to Total Liabilities
Total liabilities (as reported)	10,304,700)	11,141,700)	11,840,600)	13,062,500)	4,977,400)	4,416,170)
Less: Noncurrent deferred tax liabilities, net	39,800)	43,900)	318,500)	706,100)	205,800)	409,045)
Total liabilities (adjusted)	10,264,900)	11,097,800)	11,522,100)	12,356,400)	4,771,600)	4,007,125)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	5,894,800)	5,337,100)	5,585,500)	5,287,500)	3,279,800)	3,270,711)
Less: Net deferred tax assets (liabilities)	1,757,300)	1,705,300)	1,430,000)	971,100)	(105,600)	(340,175)
Stockholders’ equity (adjusted)	4,137,500)	3,631,800)	4,155,500)	4,316,400)	3,385,400)	3,610,886)
Adjustment to Net Income
Net income (as reported)	1,285,500)	349,400)	570,600)	355,900)	255,400)	164,639)
Add: Deferred income tax expense (benefit)	7,900)	(138,900)	(490,300)	(62,200)	51,200)	(126,888)
Net income (adjusted)	1,293,400)	210,500)	80,300)	293,700)	306,600)	37,751)

An analysis of the financial adjustments regarding the removal of deferred taxes reveals a significant divergence between reported and adjusted balance sheet positions, particularly starting in 2019. The most pronounced impact is observed in total assets, where a substantial gap emerged between reported and adjusted figures, indicating the presence of significant deferred tax assets that were eliminated in the adjusted calculations.

Asset and Liability Trends: Total reported assets grew from 7.69 billion US$ in 2017 to a peak of 18.35 billion US$ in 2019. However, the adjusted assets for the same period reached only 16.67 billion US$, representing a discrepancy of approximately 1.68 billion US$. This gap persisted through 2022, with adjusted assets remaining consistently lower than reported assets by roughly 1.8 billion US$. Simultaneously, reported liabilities spiked in 2019 to 13.06 billion US$ before trending downward to 10.30 billion US$ by 2022. The adjustment to liabilities was most significant in 2019, where reported liabilities exceeded adjusted liabilities by approximately 706 million US$, though this difference narrowed to approximately 40 million US$ by 2022.
Equity Impact: A shift in the relationship between reported and adjusted stockholders' equity occurred after 2018. In 2017 and 2018, adjusted equity was higher than reported equity, suggesting that the removal of deferred tax liabilities outweighed the removal of deferred tax assets. From 2019 onward, this trend inverted; reported equity grew to 5.89 billion US$ by 2022, while adjusted equity lagged at 4.13 billion US$. This indicates that deferred tax assets became a primary driver of the reported equity position in the latter half of the period.
Net Income Volatility: The removal of deferred taxes introduced considerable volatility to net income figures. In 2017, adjusted net income of 37.75 million US$ was significantly lower than the reported 164.64 million US$. A similar sharp divergence occurred in 2020, where adjusted net income fell to 80.30 million US$ compared to a reported 570.60 million US$. Conversely, by 2022, the figures converged, with adjusted net income of 1.29 billion US$ slightly exceeding the reported 1.28 billion US$, suggesting that deferred tax adjustments had a negligible impact on earnings by the end of the analyzed period.

The overall pattern suggests that while the reported financial statements show a larger asset base and higher equity from 2019 onwards, these figures are heavily influenced by deferred tax accounting. The adjusted figures provide a more conservative view of the company's financial position, stripping away the non-cash effects of deferred tax assets and liabilities.

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Microchip Technology Inc., Financial Ratios: Reported vs. Adjusted

Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

Microchip Technology Inc., adjusted financial ratios

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
Net Profit Margin
Reported net profit margin	18.85%	6.42%	10.82%	6.65%	6.42%	4.83%
Adjusted net profit margin	18.96%	3.87%	1.52%	5.49%	7.70%	1.11%
Total Asset Turnover
Reported total asset turnover	0.42	0.33	0.30	0.29	0.48	0.44
Adjusted total asset turnover	0.47	0.37	0.34	0.32	0.49	0.45
Financial Leverage
Reported financial leverage	2.75	3.09	3.12	3.47	2.52	2.35
Adjusted financial leverage	3.48	4.06	3.77	3.86	2.41	2.11
Return on Equity (ROE)
Reported ROE	21.81%	6.55%	10.22%	6.73%	7.79%	5.03%
Adjusted ROE	31.26%	5.80%	1.93%	6.80%	9.06%	1.05%
Return on Assets (ROA)
Reported ROA	7.94%	2.12%	3.27%	1.94%	3.09%	2.14%
Adjusted ROA	8.98%	1.43%	0.51%	1.76%	3.76%	0.50%

An analysis of the financial ratios from 2017 to 2022 reveals significant divergences between reported figures and adjusted figures following the removal of deferred taxes. The adjustments highlight a higher degree of volatility in profitability and return metrics than is evident in the reported financial statements.

Net Profit Margin: Reported net profit margins showed a general upward trajectory, peaking at 18.85% in 2022. However, the adjusted net profit margin exhibits extreme volatility, with significant contractions in 2017 (1.11%) and 2020 (1.52%). The convergence of reported and adjusted margins in 2022 (18.85% and 18.96% respectively) suggests that the impact of deferred taxes on profitability diminished significantly by the end of the period.
Total Asset Turnover: A consistent pattern is observed where adjusted total asset turnover remains marginally higher than reported turnover across all six years. While both metrics followed a similar trend—declining between 2018 and 2019 before recovering to a peak in 2022—the adjusted ratio consistently indicates a slightly higher efficiency in asset utilization.
Financial Leverage: Reported financial leverage increased from 2.35 in 2017 to a peak of 3.47 in 2019, subsequently moderating to 2.75 by 2022. In contrast, the adjusted financial leverage is consistently higher than the reported figure from 2019 onward, reaching a peak of 4.06 in 2021. This indicates that the removal of deferred tax liabilities increases the perceived leverage of the organization.
Return on Equity (ROE): The divergence between reported and adjusted ROE is most pronounced. While reported ROE remained relatively stable between 5% and 10% from 2017 to 2021, the adjusted ROE experienced sharp declines to 1.05% in 2017 and 1.93% in 2020. By 2022, the adjusted ROE surged to 31.26%, significantly exceeding the reported ROE of 21.81%, suggesting that deferred tax adjustments heavily influence equity-based return calculations.
Return on Assets (ROA): Similar to the ROE trend, the adjusted ROA exhibits greater instability than the reported ROA. The adjusted figure dropped to 0.50% in 2017 and 0.51% in 2020, while the reported ROA remained above 2% during those same periods. The trend culminated in 2022, where both metrics reached their highest points, with the adjusted ROA (8.98%) slightly surpassing the reported ROA (7.94%).

Overall, the removal of deferred taxes reveals a financial profile characterized by higher leverage and more volatile returns. The discrepancy between reported and adjusted ratios was most acute between 2017 and 2021, with a marked trend toward convergence in the 2022 fiscal year.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,285,500)	349,400)	570,600)	355,900)	255,400)	164,639)
Net sales	6,820,900)	5,438,400)	5,274,200)	5,349,500)	3,980,800)	3,407,807)
Profitability Ratio
Net profit margin¹	18.85%	6.42%	10.82%	6.65%	6.42%	4.83%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,293,400)	210,500)	80,300)	293,700)	306,600)	37,751)
Net sales	6,820,900)	5,438,400)	5,274,200)	5,349,500)	3,980,800)	3,407,807)
Profitability Ratio
Adjusted net profit margin²	18.96%	3.87%	1.52%	5.49%	7.70%	1.11%

2022 Calculations

¹ Net profit margin = 100 × Net income ÷ Net sales
= 100 × 1,285,500 ÷ 6,820,900 = 18.85%

² Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales
= 100 × 1,293,400 ÷ 6,820,900 = 18.96%

An analysis of financial performance from March 31, 2017, to March 31, 2022, reveals a significant overall expansion in profitability, characterized by a substantial increase in both reported and adjusted net income by the end of the period. While reported net income demonstrated a generally upward trajectory with a temporary decline in 2021, adjusted net income exhibited considerably higher volatility throughout the six-year window.

Net Income Trends: Reported net income grew from 164,639 thousand US$ in 2017 to 1,285,500 thousand US$ in 2022. In contrast, adjusted net income started at a much lower base of 37,751 thousand US$ in 2017 and experienced significant fluctuations, notably dropping to 80,300 thousand US$ in 2020 before surging to 1,293,400 thousand US$ in 2022.
Net Profit Margin Analysis: The reported net profit margin showed a steady increase from 4.83% in 2017 to a peak of 18.85% in 2022, despite a dip to 6.42% in 2021. The adjusted net profit margin displayed greater instability, fluctuating between a low of 1.11% in 2017 and a high of 18.96% in 2022. A notable contraction occurred in 2020, where the adjusted margin fell to 1.52%.
Reported vs. Adjusted Divergence: Significant discrepancies between reported and adjusted figures are observed in several periods. In 2020, a stark divergence occurred where reported net income reached 570,600 thousand US$ (10.82% margin) while adjusted net income fell to 80,300 thousand US$ (1.52% margin). This indicates that non-recurring items or specific tax adjustments heavily inflated the reported figures relative to core operational performance during that year. Conversely, by March 31, 2022, the reported and adjusted margins converged almost entirely at 18.85% and 18.96% respectively, suggesting a period where one-time impacts were minimal.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net sales	6,820,900)	5,438,400)	5,274,200)	5,349,500)	3,980,800)	3,407,807)
Total assets	16,199,500)	16,478,800)	17,426,100)	18,350,000)	8,257,200)	7,686,881)
Activity Ratio
Total asset turnover¹	0.42	0.33	0.30	0.29	0.48	0.44
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net sales	6,820,900)	5,438,400)	5,274,200)	5,349,500)	3,980,800)	3,407,807)
Adjusted total assets	14,402,400)	14,729,600)	15,677,600)	16,672,800)	8,157,000)	7,618,011)
Activity Ratio
Adjusted total asset turnover²	0.47	0.37	0.34	0.32	0.49	0.45

2022 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 6,820,900 ÷ 16,199,500 = 0.42

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 6,820,900 ÷ 14,402,400 = 0.47

The financial performance from 2017 to 2022 is characterized by a significant expansion of the asset base followed by a period of gradual contraction and a recovery in asset utilization efficiency.

Asset Base Trajectory: Reported total assets grew moderately from US$ 7.69 billion in 2017 to US$ 8.26 billion in 2018, before experiencing a sharp increase to US$ 18.35 billion in 2019. Following this peak, a consistent downward trend was observed, with assets declining to US$ 16.20 billion by March 31, 2022. Adjusted total assets mirrored this pattern, peaking at US$ 16.67 billion in 2019 and decreasing to US$ 14.40 billion by the end of the period.
Adjusted Total Asset Turnover Trends: The adjusted total asset turnover ratio increased from 0.45 in 2017 to 0.49 in 2018. A significant decline occurred in 2019, with the ratio dropping to 0.32, which correlates with the substantial increase in the asset base during that year. However, a steady upward trend followed this low point, with the ratio improving to 0.34 in 2020, 0.37 in 2021, and reaching 0.47 in 2022, indicating a return toward previous efficiency levels.
Impact of Financial Adjustments: A consistent discrepancy is noted between reported and adjusted metrics. Adjusted total assets were lower than reported assets in every period analyzed. As a result, the adjusted total asset turnover ratio remained consistently higher than the reported total asset turnover ratio. This suggest that the adjustments remove specific asset components that would otherwise lower the calculated efficiency of asset utilization, as seen in 2022 where the adjusted turnover of 0.47 exceeded the reported turnover of 0.42.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Total assets	16,199,500)	16,478,800)	17,426,100)	18,350,000)	8,257,200)	7,686,881)
Stockholders’ equity	5,894,800)	5,337,100)	5,585,500)	5,287,500)	3,279,800)	3,270,711)
Solvency Ratio
Financial leverage¹	2.75	3.09	3.12	3.47	2.52	2.35
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets	14,402,400)	14,729,600)	15,677,600)	16,672,800)	8,157,000)	7,618,011)
Adjusted stockholders’ equity	4,137,500)	3,631,800)	4,155,500)	4,316,400)	3,385,400)	3,610,886)
Solvency Ratio
Adjusted financial leverage²	3.48	4.06	3.77	3.86	2.41	2.11

2022 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 16,199,500 ÷ 5,894,800 = 2.75

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 14,402,400 ÷ 4,137,500 = 3.48

The financial profile exhibits a significant expansion in the balance sheet starting in 2019, followed by a period of gradual contraction and stabilization. A notable divergence exists between reported and adjusted values, particularly concerning the calculation of financial leverage, which suggests a material impact from adjustments likely related to income tax accounting.

Asset and Equity Trends: Total assets experienced a substantial increase between March 31, 2018, and March 31, 2019, rising from approximately 8.26 billion to 18.35 billion reported dollars. This expansion was followed by a steady decline through March 31, 2022, ending at 16.20 billion. Stockholders' equity followed a similar upward trajectory in 2019, increasing from 3.28 billion to 5.29 billion reported dollars, and generally maintained a positive trend to reach 5.89 billion by the end of the period.
Reported Financial Leverage: The reported financial leverage ratio increased from 2.35 in 2017 to a peak of 3.47 in 2019. Following this peak, the ratio trended downward, settling at 2.75 by March 31, 2022, indicating a relative reduction in the use of debt to finance assets compared to the 2019 peak.
Adjusted Financial Leverage: Adjusted financial leverage shows a more aggressive profile than reported figures from 2019 onwards. While it began lower than reported leverage in 2017 (2.11 versus 2.35), it surged to 3.86 in 2019 and reached a peak of 4.06 in 2021. This suggests that the adjustments made to the balance sheet—specifically the reduction in adjusted equity relative to reported equity—magnify the leverage ratio.
Divergence Analysis: A widening gap is observed between reported and adjusted financial leverage. By March 31, 2021, the adjusted leverage was 0.97 points higher than the reported leverage (4.06 versus 3.09). This divergence is primarily driven by the fact that adjusted stockholders' equity remained consistently lower than reported equity from 2018 through 2022, which mathematically increases the leverage ratio when applied to the adjusted asset base.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,285,500)	349,400)	570,600)	355,900)	255,400)	164,639)
Stockholders’ equity	5,894,800)	5,337,100)	5,585,500)	5,287,500)	3,279,800)	3,270,711)
Profitability Ratio
ROE¹	21.81%	6.55%	10.22%	6.73%	7.79%	5.03%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,293,400)	210,500)	80,300)	293,700)	306,600)	37,751)
Adjusted stockholders’ equity	4,137,500)	3,631,800)	4,155,500)	4,316,400)	3,385,400)	3,610,886)
Profitability Ratio
Adjusted ROE²	31.26%	5.80%	1.93%	6.80%	9.06%	1.05%

2022 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 1,285,500 ÷ 5,894,800 = 21.81%

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 1,293,400 ÷ 4,137,500 = 31.26%

The financial trajectory from 2017 to 2022 is marked by substantial growth in net income and stockholders' equity, though a significant divergence exists between reported and adjusted figures. While reported metrics suggest a more linear progression of profitability, the adjusted figures reveal high volatility, particularly in the mid-period, indicating that non-recurring items have heavily influenced the reported financial results.

Net Income Trends: Reported net income exhibited a general upward trend, increasing from 164.6 million in 2017 to a peak of 1.285 billion in 2022. In contrast, adjusted net income fluctuated aggressively, falling to 80.3 million in 2020 despite a reported net income of 570.6 million for the same period. By 2022, reported and adjusted net income converged, both exceeding 1.28 billion, suggesting a reduction in the impact of non-recurring adjustments in the final year of the analysis.
Stockholders' Equity Variance: Reported stockholders' equity grew steadily from 3.27 billion in 2017 to 5.89 billion in 2022. Adjusted stockholders' equity followed a different pattern, peaking at 4.32 billion in 2019 before declining to 4.14 billion by 2022. The widening gap between reported and adjusted equity suggests that specific accounting adjustments or tax-related entries significantly inflated the reported equity base over time.
Return on Equity (ROE) Analysis: The reported ROE demonstrated a positive trend, rising from 5.03% in 2017 to 21.81% in 2022. However, the adjusted ROE exhibited extreme instability, dropping to a low of 1.05% in 2017 and 1.93% in 2020. A sharp reversal occurred in 2022, where the adjusted ROE surged to 31.26%, significantly outpacing the reported ROE. This divergence in 2022 is driven by the combination of higher adjusted net income and a lower adjusted equity base, indicating a substantial increase in operational efficiency when non-recurring elements are removed.

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Based on: 10-K (reporting date: 2022-03-31), 10-K (reporting date: 2021-03-31), 10-K (reporting date: 2020-03-31), 10-K (reporting date: 2019-03-31), 10-K (reporting date: 2018-03-31), 10-K (reporting date: 2017-03-31).

	Mar 31, 2022	Mar 31, 2021	Mar 31, 2020	Mar 31, 2019	Mar 31, 2018	Mar 31, 2017
As Reported
Selected Financial Data (US$ in thousands)
Net income	1,285,500)	349,400)	570,600)	355,900)	255,400)	164,639)
Total assets	16,199,500)	16,478,800)	17,426,100)	18,350,000)	8,257,200)	7,686,881)
Profitability Ratio
ROA¹	7.94%	2.12%	3.27%	1.94%	3.09%	2.14%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	1,293,400)	210,500)	80,300)	293,700)	306,600)	37,751)
Adjusted total assets	14,402,400)	14,729,600)	15,677,600)	16,672,800)	8,157,000)	7,618,011)
Profitability Ratio
Adjusted ROA²	8.98%	1.43%	0.51%	1.76%	3.76%	0.50%

2022 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 1,285,500 ÷ 16,199,500 = 7.94%

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 1,293,400 ÷ 14,402,400 = 8.98%

The financial performance between 2017 and 2022 is characterized by a significant expansion of the asset base and a culminating surge in profitability and asset efficiency in the final year of the period.

Net Income Trends: Reported net income exhibited a generally upward trajectory, growing from US$ 164.6 million in 2017 to US$ 1.28 billion in 2022. In contrast, adjusted net income displayed substantial volatility, specifically experiencing a notable decline to US$ 80.3 million in 2020 before rising sharply to US$ 1.29 billion in 2022. The disparity between reported and adjusted figures, particularly in 2017 and 2020, indicates the impact of significant non-recurring items or tax adjustments.
Asset Base Dynamics: A substantial increase in the asset base occurred between March 31, 2018, and March 31, 2019, with reported total assets rising from US$ 8.26 billion to US$ 18.35 billion. Following this peak, a gradual contraction was observed, with reported total assets declining to US$ 16.20 billion by 2022. Adjusted total assets followed a nearly identical pattern, peaking in 2019 and decreasing steadily through 2022.
Adjusted Return on Assets (ROA) Performance: The adjusted ROA demonstrated significant fluctuation throughout the period. After an initial increase to 3.76% in 2018, it declined to a low of 0.51% in 2020. A recovery phase followed in 2021, leading to a sharp peak of 8.98% in 2022. This final spike indicates a substantial increase in asset productivity, as the adjusted net income grew exponentially while the adjusted asset base simultaneously contracted.
Comparative ROA Analysis: Reported ROA remained relatively stable, oscillating between 1.94% and 3.27% from 2017 to 2021, before jumping to 7.94% in 2022. The divergence between reported and adjusted ROA was most pronounced in 2017 and 2020, where adjusted ROA was significantly lower than reported ROA. By 2022, both metrics aligned upward, signaling a period of high operational efficiency and strong bottom-line performance relative to the company's total resources.

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