Teradyne Inc. (NASDAQ:TER)

Current Income Tax Expense

The current income tax expense displayed fluctuations over the analyzed periods. Starting at $67,760 thousand in 2019, it nearly doubled to $132,556 thousand in 2020. The upward trend continued, reaching $163,671 thousand in 2021 and remaining relatively stable at $163,577 thousand in 2022. In 2023, there was a notable decrease to $114,462 thousand, indicating a reduction in current tax obligations compared to the previous two years.

Deferred Income Tax Expense

The deferred income tax expense consistently showed negative values, reflecting deferred tax benefits rather than expenses. The magnitude of these benefits increased over time, starting at -$9,456 thousand in 2019, growing to -$15,688 thousand in 2020, and further to -$17,305 thousand in 2021. A significant jump occurred in 2022, reaching -$38,693 thousand, followed by a slight decrease to -$37,642 thousand in 2023. This trend suggests increasing recognition of deferred tax assets or reductions in deferred tax liabilities over the years, with a particularly large adjustment in 2022.

Provision for Income Taxes

The overall provision for income taxes reflects the net effect of current and deferred tax expenses. It rose steadily from $58,304 thousand in 2019 to $116,868 thousand in 2020, then increased further to $146,366 thousand in 2021. However, in 2022 there was a decrease to $124,884 thousand, followed by a more pronounced decline to $76,820 thousand in 2023. This pattern indicates that while the provision rose significantly in the earlier years, recent periods have seen a reduction in total income tax burden, driven by both decreases in current taxes and sustained deferred tax benefits.

The data presents the evolution of various tax-related components and the effective tax rate over a five-year period. Several trends and observations can be discerned from the figures:

U.S. statutory federal tax rate

The statutory federal tax rate remained constant at 21% throughout the entire period, indicating stability in the baseline tax rate applicable.

Foreign taxes

Foreign taxes showed a decreasing negative impact from -4% in 2019 to a low of -5.6% in 2020, then slightly improved to -4.5% in 2021, and thereafter significantly shifted, becoming positive at 2.5% by 2023. This indicates a changing dynamic in foreign tax-related expenses or credits, possibly due to geographic income shifts or changes in foreign tax laws.

Non-deductible officers’ compensation

This item appeared starting in 2020, with a gradual increase from 0.5% to a peak of 1.3% in 2022, followed by a slight decrease to 1.1% in 2023. It reflects a growing yet modest impact of compensation costs that are not deductible for tax purposes.

U.S. global intangible low-taxed income (GILTI)

There was a notable decline in GILTI's percentage from 6.2% in 2019 to 0.6% in 2021, after which it showed a mild uptick to 1.2% in 2022 and a slight decrease to 0.8% in 2023. This suggests a reduction in global intangible low-taxed income tax liabilities over time, but with some fluctuations in recent years.

State income taxes, net of federal tax benefit

State income taxes remained minimal, ranging from 0.5% in 2019 down to -0.1% in 2022, then a slight recovery to 0.1% in 2023. This indicates a relatively insignificant impact on the overall tax rate.

U.S. research and development credit

The R&D credit consistently contributed to reducing the effective tax rate, ranging from -1.8% in 2019, decreasing slightly to -1.3% and -1.4% in 2020 and 2021 respectively, then returning to -1.8% in 2022 before significantly boosting to -4.2% in 2023. The marked increase in 2023 highlights an enhanced benefit from R&D incentives during that year.

U.S. foreign derived intangible income (FDII)

FDII benefits increased in magnitude, moving from -2.6% in 2019 to -3.9% in 2023 with some fluctuations in between, indicating an increasing tax advantage derived from intangible income sourced from foreign markets.

Foreign tax credits

Foreign tax credits showed variability, beginning at -5.9% in 2019, then lessening to -0.5% in 2021, further decreasing to -1.0% in 2022, followed by a stronger benefit of -3.3% in 2023. Though fluctuating, the overall impact remains a tax credit reducing the effective tax burden.

Equity compensation

Equity compensation effects were relatively minor and stable, ranging narrowly between -0.4% and -1.1%, with a general trend towards decreasing impact by 2023.

U.S. transition tax

This tax was only recorded in 2019 at 1.9%, with no further impacts in subsequent years, indicating a one-time transition-related tax event.

Other, net

This category demonstrated volatility, with negative contributions in 2019 (-3.5%) and 2021 (-0.4%), but moved to small positive contributions in 2022 (0.4%) and 2023 (0.9%), suggesting varying miscellaneous tax impacts.

Effective tax rate

The effective tax rate climbed from 11.1% in 2019 to peak at 14.9% in 2022, with a slight decline to 14.6% in 2023. This upward movement reflects a combination of the tax components’ influence, including reduced tax credits, shifts in foreign taxes, and other tax adjustments, despite the statutory rate remaining constant.

The analysis of the annual financial data over the five-year period reveals several notable trends and shifts in financial positions and obligations.

Tax Credits

Tax credits have shown a steady increase each year, rising from US$79,480 thousand in 2019 to US$112,571 thousand in 2023, indicating a growing benefit from tax-related incentives or credits.

Research and Development Expenses

Research and development expenses were not reported from 2019 to 2021 but exhibited significant growth from 2022 (US$47,760 thousand) to 2023 (US$82,571 thousand), suggesting an increased investment focus in innovation and product development in recent years.

Accruals

Accruals increased steadily from US$25,424 thousand in 2019 to US$41,459 thousand in 2021, followed by a decline to US$25,644 thousand in 2023. This pattern may reflect variations in accrued liabilities or payable amounts, potentially linked to operational fluctuations.

Pension Liabilities

Pension liabilities grew modestly from 2019 to 2021, peaking at US$28,722 thousand, then decreased significantly in 2022 before slightly rising again in 2023. This volatility might be due to changes in actuarial assumptions or funding strategies.

Lease Liabilities

Lease liabilities, absent in 2019, emerged in 2020 with US$12,627 thousand and consistently increased through 2023 to US$21,167 thousand, reflecting a possible adoption or expansion of leasing commitments.

Inventory Valuations

Inventory valuations were relatively stable, fluctuating between US$18,427 thousand and US$22,554 thousand, before decreasing to US$19,289 thousand in 2023, which might indicate inventory management adjustments or demand changes.

Deferred Revenue

Deferred revenue increased steadily from US$7,622 thousand in 2019 to US$14,909 thousand in 2022, followed by a slight reduction in 2023. The rising trend suggests growing prepaid income or subscription-based revenues, stabilizing recently.

Equity Compensation and Vacation Accrual

Equity compensation remained relatively stable, with minor fluctuations around US$6,500 to US$7,200 thousand. Vacation accruals showed a gradual increase from US$4,768 thousand in 2019 to US$6,096 thousand in 2023, indicating consistent employee-related liabilities.

Net Operating Loss Carryforwards

There was an initial decline in net operating loss carryforwards from US$2,705 thousand in 2019 to US$1,721 thousand in 2021, but a substantial increase occurred in 2023 to US$5,737 thousand, suggesting recent operational losses or tax strategy adjustments.

Investment Impairment

Investment impairment remained constant at US$3,292 thousand throughout the period, implying a stable impairment status with no new write-downs.

Intangible Assets

Positive intangible assets were recognized starting in 2022, increasing from US$350 thousand to US$2,323 thousand in 2023, while negative intangible assets decreased in magnitude from -US$16,705 thousand in 2019 to zero by 2022. This trend indicates revaluation or acquisition adjustments in intangible assets.

Marketable Securities

Marketable securities showed positive values only in 2022 and 2023, with a sharp decline from US$2,283 thousand to US$128 thousand in 2023. Negative values from earlier years disappeared after 2021, reflecting changes in available-for-sale securities or valuation methods.

Other Items

The 'Other' category showed variability, with a low point in 2020 (US$626 thousand), an increase in 2022 (US$2,520 thousand), followed by a decline in 2023 (US$953 thousand), suggesting miscellaneous asset or liability adjustments.

Deferred Tax Assets and Valuation Allowance

Gross deferred tax assets rose steadily from US$174,836 thousand in 2019 to US$325,754 thousand in 2023. Correspondingly, the valuation allowance also increased in magnitude, from -US$77,177 thousand to -US$109,251 thousand, indicating a larger reserve against deferred tax assets. The net deferred tax assets showed a strong upward trend, enhancing from US$61,115 thousand in 2019 to US$175,592 thousand in 2023, reflecting improved realizable tax benefits.

Right of Use Assets

Right of use assets, initially negative values reported from 2020, deepened from -US$10,688 thousand in 2020 to -US$19,016 thousand in 2023, consistent with the increase in lease liabilities and indicating higher leased asset obligations.

Depreciation

Depreciation expenses exhibited fluctuations without a clear linear trend, reaching their lowest point in 2021 (-US$10,691 thousand), spiking in 2022 (-US$19,078 thousand), and slightly decreasing again in 2023 (-US$16,681 thousand), which could relate to asset acquisition or disposals.

Contingent Consideration

Contingent consideration was recognized negatively from 2020 onwards at a stable value of -US$5,214 thousand, indicating consistent contingent liabilities or obligations related to business acquisitions or agreements.

Deferred Tax Liabilities

Deferred tax liabilities increased in magnitude from -US$36,544 thousand in 2019 to about -US$41,000 thousand in the subsequent years, showing a relatively stable tax obligation over the period.

Deferred Tax Assets

The deferred tax assets have shown a consistent upward trend over the five-year period from 2019 to 2023. Starting at $75,185 thousand in 2019, the figure increased to $87,913 thousand in 2020 and continued to grow steadily to $102,428 thousand in 2021. This growth accelerated in the subsequent years, reaching $142,784 thousand in 2022 and further climbing to $175,775 thousand by the end of 2023. This indicates a significant increase in the company's future tax benefits, which could result from rising deductible temporary differences or carryforwards.

Deferred Tax Liabilities

In contrast, deferred tax liabilities have exhibited a marked decreasing trend over the same period. From $14,070 thousand in 2019, the amount declined progressively each year, reducing to $10,821 thousand in 2020 and $6,327 thousand in 2021. The downward movement persisted with figures falling to $3,267 thousand in 2022 and finally reaching a minimal amount of $183 thousand by 2023. This decline suggests a reduction in taxable temporary differences that would create future tax payments.

Overall Observations

The divergent trends between deferred tax assets and liabilities result in an increasing net deferred tax asset position. Over the five years, the growing differential points to improved tax benefit recognitions relative to taxable obligations. This may reflect changes in the company's operations, tax planning strategies, or regulatory impacts enhancing the net tax asset position.

The analysis of the adjusted financial data reveals several noteworthy trends over the five-year period ending in 2023. Total assets, after adjustment for income tax effects, show an overall increase from 2019 to 2021, peaking at approximately $3.71 billion in 2021. Subsequently, there is a decline in the adjusted total assets through 2022 and 2023, reaching about $3.31 billion by the end of 2023, indicating a moderate contraction in asset base during the last two years.

The trend in adjusted total liabilities demonstrates a consistent decrease over the period. Beginning at roughly $1.29 billion in 2019, adjusted liabilities slightly increased in 2020 but then followed a marked downward path through 2023, falling to around $961 million. This decline in liabilities suggests a reduction in debt or other obligations, contributing to an improvement in financial leverage.

Adjusted shareholders’ equity also reflects growth over the initial years, rising from about $1.42 billion in 2019 to a peak close to $2.47 billion in 2021. However, it then exhibits a declining trend for the next two years, ending at approximately $2.35 billion in 2023. Despite this decrease, equity remains substantially higher than the 2019 level, implying strengthened capital base albeit with some erosion in the most recent years.

Adjusted net income presents a significant growth trajectory from 2019 through 2021, increasing from $458 million to nearly $1 billion, which signifies strong profitability improvements over these years. Nevertheless, this upward trend reverses in 2022 and continues downward into 2023, with net income decreasing to about $411 million, indicating challenges in maintaining prior profit levels in the latter periods.

Assets:

Growth to 2021 followed by decline through 2023, suggesting expansion then contraction.

Liabilities:

Overall reduction over five years, enhancing financial stability.

Shareholders’ Equity:

Increase until 2021 with subsequent moderate decline but still above 2019 levels, showing solid capital position with recent pressures.

Net Income:

Strong earnings growth through 2021, followed by a notable decrease through 2023, pointing to profitability challenges in recent years.

In summary, the company demonstrated solid growth and profitability improvements through 2021, supported by asset expansion and liability reduction. However, the most recent two years show signs of contraction in assets, erosion of equity, and reduced net income, indicating potential operational or market pressures impacting financial performance.

The analysis of the financial ratios over the five-year period reveals notable trends in profitability, asset efficiency, leverage, and return on equity and assets.

Net Profit Margin

Both reported and adjusted net profit margins display a growth trajectory from 2019 through 2021, increasing from around 20% to nearly 27%. However, starting in 2022, there is a distinct decline observed, with the margin dropping to approximately 22.7% reported and 21.5% adjusted, and further decreasing in 2023 to about 16.8% reported and 15.4% adjusted. This suggests a reduction in profitability relative to sales in the most recent two years.

Total Asset Turnover

The total asset turnover ratios, both reported and adjusted, show improvement from 2019 to 2021, climbing from approximately 0.82–0.85 to a peak of 0.97–1.0, indicating enhanced efficiency in utilizing assets to generate sales. Nonetheless, in 2022 and 2023, the turnover ratios decrease to 0.9–0.94 and further to 0.77–0.81, signaling a diminishing asset utilization efficiency trajectory.

Financial Leverage

Financial leverage ratios demonstrate a gradual decline over the period. Reported leverage decreases from 1.88 in 2019 to 1.38 in 2023, and adjusted leverage follows a similar path from 1.91 to 1.41. This trend signifies a reduction in the extent of reliance on debt financing or other liabilities compared to equity, indicating a more conservative capital structure emerging over time.

Return on Equity (ROE)

Return on equity, both reported and adjusted, initially trends upward, reaching a peak in 2021 at around 39.6% reported and 40.4% adjusted. In the subsequent years, ROE declines notably, dropping to approximately 29.2% in 2022 and further down to 17.8% reported and 17.5% adjusted in 2023. This pattern mirrors the trend in net profit margins and asset turnover, reflecting decreased effectiveness in generating shareholder returns in recent years.

Return on Assets (ROA)

ROA follows a similar pattern, increasing from around 16.8% in 2019 to a peak near 26.9% in 2021, then falling to roughly 20.4% in 2022 and substantially lower to about 12.9% in 2023. Such a decline indicates reduced profitability deriving from the total asset base.

In summary, the period from 2019 to 2021 is characterized by improving profitability, enhanced asset utilization, and strong returns. Starting from 2022, these metrics show a reversal with declining profitability margins, decreasing efficiency in asset use, and a reduction in returns on both equity and assets. Meanwhile, financial leverage consistently decreases, indicating a move towards lower financial risk or a more equity-based capital structure. The trends suggest challenges in maintaining profit levels and operational efficiency in the recent years despite a more conservative leverage position.

The data reveals notable trends in both reported and adjusted financial performance metrics over the five-year period.

Net Income Trends

Reported net income demonstrated a strong upward trajectory from 2019 through 2021, increasing from approximately $467 million to over $1 billion. This represents more than a doubling within two years. However, following the peak in 2021, there was a marked decline in the subsequent years. By 2022, reported net income decreased to around $715 million and further declined to approximately $449 million in 2023.

Adjusted net income followed a similar pattern, starting near $458 million in 2019 and rising steadily to just under $1 billion in 2021. Thereafter, a decline is observed, with adjusted income falling to approximately $677 million in 2022 and further decreasing to about $411 million in 2023. The adjustment reduces reported amounts slightly, but the overall trend mirrors that of reported net income.

Net Profit Margin Trends

Reported net profit margin improved consistently from 20.37% in 2019 to a peak of 27.4% in 2021, indicating enhanced profitability relative to revenues. Thereafter, profitability margins diminished, falling to 22.68% in 2022 and dropping further to 16.77% in 2023.

Adjusted net profit margin displays the same directional trend, increasing from 19.96% in 2019 to 26.93% in 2021, followed by a reduction to 21.45% in 2022 and then to 15.36% in 2023. The adjusted figures are consistently slightly lower than reported margins, reflecting the impact of deferred income tax adjustments or other forms of tax corrections.

Overall Insight

The financial data presents a growth phase during 2019-2021 characterized by increasing net income and expanding profitability margins. This is succeeded by a contraction phase in 2022-2023, with both income and margins declining substantially, which may indicate challenges such as increased costs, market pressures, or other operational factors impacting profitability. The close alignment between reported and adjusted figures implies that deferred income tax adjustments did not drastically alter the income statement outcomes but have a consistent minor downward effect on reported earnings and margins.

Total Assets

The reported total assets increased significantly from 2,787,014 thousand USD in 2019 to a peak of 3,809,425 thousand USD in 2021. Following this peak, there was a decrease to 3,501,252 thousand USD in 2022 and a slight further decrease to 3,486,824 thousand USD in 2023. The adjusted total assets exhibit a similar trend, starting at 2,711,829 thousand USD in 2019, rising to 3,706,997 thousand USD in 2021, then declining to 3,358,468 thousand USD in 2022 and further to 3,311,049 thousand USD in 2023. This indicates a substantial growth period up to 2021 followed by a contraction phase in subsequent years.

Total Asset Turnover

The reported total asset turnover ratio shows an upward trend from 0.82 in 2019 to a peak of 0.97 in 2021, indicating improved efficiency in using assets to generate sales during this period. In 2022, the ratio declined to 0.90 and more sharply to 0.77 in 2023. The adjusted total asset turnover follows a comparable pattern, increasing from 0.85 in 2019 to 1.00 in 2021, then decreasing to 0.94 in 2022 and 0.81 in 2023. The peak turnover ratios in 2021 suggest optimal asset utilization that gradually diminished in the following years, potentially reflecting changes in operational effectiveness or market conditions.

The financial data reveals several key trends over the period from the end of 2019 through the end of 2023. Total assets experienced growth initially, reaching a peak in 2021, before declining in the following years. Both reported and adjusted figures follow a similar trajectory, with the adjusted totals consistently lower but closely tracking the reported amounts.

Shareholders’ equity demonstrated a strong upward trend through 2021, with a significant increase noted in 2020 and continuing growth into 2021. However, equity levels saw a moderate decline in 2022 before partially recovering by the end of 2023. Adjusted equity values maintain a similar shape, consistently registering slightly lower than the reported figures.

Financial leverage ratios, both reported and adjusted, show a steady decrease during the observed period. Starting from a relatively high leverage in 2019, the ratio declined continuously each year, indicating a gradual reduction in reliance on debt financing relative to equity. This decreasing leverage trend suggests an improvement in the company's capital structure, potentially reflecting efforts to strengthen financial stability and decrease risk exposure.

Total Assets

Growth from 2019 to 2021, followed by decline through 2023.

Adjusted assets slightly lower than reported values but parallel in trend.

Shareholders’ Equity

Strong growth to 2021, dip in 2022, modest recovery in 2023.

Adjusted equity consistently below reported but closely aligned.

Financial Leverage

Consistent downward trend indicating reduced debt ratio each year.

Adjusted leverage marginally higher than reported but follows identical pattern.

The analysis of the financial data over the five-year period reveals several important trends and insights related to net income, shareholders’ equity, and return on equity (ROE), both reported and adjusted for deferred income tax.

Net Income Trends

The reported net income shows a consistent upward trend from 2019 through 2021, nearly doubling from approximately 467 million US dollars in 2019 to over 1 billion US dollars in 2021. However, there is a marked decline in net income in the subsequent years, falling to approximately 715 million in 2022 and further dropping to around 449 million in 2023. A similar pattern appears in adjusted net income, which closely mirrors the reported figures but is slightly lower each year, reflecting the impact of adjustments related to deferred income taxes. The peak in 2021 followed by a sharp decline in the following years suggests possible challenges or changes in the business environment or tax-related adjustments affecting profitability.

Shareholders’ Equity Movements

Reported shareholders’ equity increased significantly from about 1.48 billion US dollars in 2019 to a high of approximately 2.56 billion in 2021. However, it then slightly decreased in 2022 to around 2.45 billion before marginally rising again to nearly 2.53 billion in 2023. Adjusted shareholders’ equity follows the same general trend but remains consistently below the reported equity figures, indicating that deferred tax effects reduce the equity base. The growth through 2021 demonstrates an accumulation of retained earnings or capital inflows, while the fluctuations in later years may reflect dividend payments, share buybacks, or changes in deferred tax liabilities/assets.

Return on Equity (ROE) Dynamics

The reported ROE exhibits a general rise from 31.58% in 2019 to a peak of 39.59% in 2021, indicating improved efficiency in generating profits from shareholders’ equity during that period. However, ROE significantly declines afterward, dropping to 29.19% in 2022 and further to 17.77% in 2023. The adjusted ROE closely follows the reported ROE with slightly higher values, reaching 40.44% at its peak in 2021 before falling to 17.49% in 2023. The sharp decline in ROE after 2021 aligns with the decreased net income and relatively stable equity levels, pointing to reduced profitability or increased equity base diluting returns.

Overall, the data suggest a period of growth in profitability and equity up to 2021, followed by a downturn in income and a consequent reduction in ROE over the last two years analyzed. Adjustments for deferred income taxes slightly modify the net income and equity values but do not significantly alter the observed trends. The recent declines call for further investigation into underlying causes such as market conditions, operational challenges, or tax environment changes impacting financial performance.

The analysis of the financial data over the five-year period reveals several key trends and insights related to net income, total assets, and return on assets (ROA) for the company.

Net Income

Both reported and adjusted net income exhibit an overall upward trajectory from 2019 through 2021, reaching their peak values in 2021. Reported net income increased significantly from approximately 467 million USD in 2019 to about 1.01 billion USD in 2021. Adjusted net income followed a similar pattern, rising from 458 million USD to nearly 1 billion USD over the same period. However, starting in 2022, net income values declined markedly, with reported net income dropping to approximately 716 million USD in 2022 and further to 449 million USD in 2023. Adjusted net income mirrored this decline, falling to roughly 677 million USD in 2022 and then to 411 million USD in 2023. This indicates a substantial decrease in profitability in the latter two years after a period of growth.

Total Assets

Total assets, both reported and adjusted, increased noticeably from 2019 to 2021. Reported total assets rose from around 2.79 billion USD in 2019 to 3.81 billion USD in 2021, while adjusted total assets went from 2.71 billion USD to nearly 3.71 billion USD over the same interval. Post-2021, there was a slight contraction in asset base; in 2022 total assets declined to roughly 3.50 billion USD (reported) and 3.36 billion USD (adjusted), with a further marginal reduction in 2023 to approximately 3.49 billion USD and 3.31 billion USD, respectively. The data suggests the company accumulated assets up to 2021 but commenced some divestments or asset reductions thereafter.

Return on Assets (ROA)

Reported and adjusted ROA percentages track closely and indicate strong returns in the earlier years, peaking in 2021 with reported ROA near 26.63% and adjusted ROA around 26.9%. After 2021, ROA declined significantly, diminishing to about 20.44% (reported) and 20.15% (adjusted) in 2022, and further reducing in 2023 to 12.87% and 12.42%, respectively. The downward trend in ROA reflects the combined effect of declining net income and the stable-to-decreasing asset base, highlighting a reduction in the efficiency of asset utilization to generate profits.

Overall, the data demonstrates a period of growth and profitability peaking in 2021, followed by a notable decline in both profitability and asset base. The decrease in ROA in the last two years denotes a weakened ability to convert assets into earnings. This trend may necessitate focused strategic or operational initiatives to restore profitability and asset efficiency.