Western Digital Corp. (NASDAQ:WDC)

The analyzed financial data reveals several notable trends regarding the intangible assets over the period from mid-2018 to mid-2023.

Goodwill

The goodwill value remains relatively stable, with a slight decrease from 10,075 million US dollars in June 2018 to 10,037 million US dollars in June 2023, indicating minor fluctuations but overall consistency in this asset category.

Existing technology

This asset shows very stable values, maintaining around 4,231 to 4,323 million US dollars across the years, with a slight downward adjustment between 2018 and 2021 followed by a steady state thereafter.

Trade names and trademarks

Trade names and trademarks consistently hold a stable value around 648 million US dollars, showing minimal variance over the years.

Customer relationships

A gradual decline is observed in customer relationships, decreasing from 635 million US dollars in 2018 to 611 million US dollars in 2023, reflecting minor amortization or impairment effects over time.

Other intangible assets

Entries under "Other" intangible assets are incomplete beyond 2019, with data missing for subsequent years, limiting the ability to analyze trends in this subcategory.

Leasehold interests

Leasehold interests show a sharp decline from 32 million US dollars in 2018 to just 1 million US dollars in 2023, indicating significant amortization or asset disposals.

Finite-lived intangible assets (gross and net)

The gross finite-lived intangible assets decreased from 5,818 million US dollars in 2018 to 5,491 million US dollars in 2023. Accumulated amortization of these assets increased markedly from -3,218 million US dollars to -5,491 million US dollars over the same period. Consequently, net finite-lived intangible assets sharply declined from 2,600 million US dollars in 2018 to essentially zero by 2023, reflecting continued amortization and the nearing exhaustion of these assets' book values.

In-process research and development

This cohort remains consistently valued at around 80 million US dollars, demonstrating steady investment or capitalization without significant change.

Other intangible assets, net

Net other intangible assets show a noticeable downward trend from 2,680 million US dollars in 2018 to 80 million US dollars in 2023, consistent with the trend seen in finite-lived assets and accumulated amortization.

Goodwill and other intangible assets, net

The combined figure for goodwill and other intangible assets net has decreased steadily from 12,755 million US dollars in 2018 to 10,117 million US dollars in 2023. This reflects amortization and write-downs predominantly impacting finite-lived and other intangible assets, while goodwill remains largely unchanged.

In summary, the data reflects a stable position in goodwill and certain intangible assets related to technology and trademarks, while finite-lived intangible assets and related categories appear to be subject to consistent amortization, leading to a significant reduction in their net book value over the five-year span. The near exhaustion of net finite-lived intangible assets highlights ongoing asset consumption or write-offs. The steady treatment of in-process research and development contrasts with the declining trends observed in other asset classes.

The analysis of the reported and goodwill-adjusted financial data over the six-year period reveals several notable trends and variations in asset and equity figures.

Total Assets (Reported vs. Adjusted)

The reported total assets displayed a general declining trend over the period, starting at $29,235 million in June 2018 and decreasing to $24,429 million by June 2023. This represents a reduction of approximately 16.4%. Within this timeframe, the assets experienced fluctuations but maintained a consistent downward trajectory.

The adjusted total assets, which account for goodwill adjustments, also exhibited a declining pattern similar to the reported total assets but with a more pronounced decrease. The adjusted assets decreased from $19,160 million in June 2018 to $14,392 million in June 2023, reflecting a larger relative decline of around 24.8%. This suggests that the goodwill adjustment contributed significantly to the reduction in asset value, indicating possible impairments or write-offs in intangible assets during this period.

Shareholders’ Equity (Reported vs. Adjusted)

The reported shareholders’ equity showed a downward trend initially, decreasing from $11,531 million in June 2018 to a low of $9,551 million in July 2020. However, it rebounded thereafter, increasing to $12,221 million by July 2022 before slightly declining again to $11,723 million in June 2023. Overall, the reported equity faced volatility but ended near the initial levels with a net decrease of roughly 1.4% after five years.

In contrast, the adjusted shareholders’ equity experienced significant fluctuations, starting at a low base of $1,456 million in June 2018 and dropping to negative values in 2019 and 2020 (-$109 million and -$516 million, respectively). This negative equity position implies that goodwill adjustments had a substantial adverse effect during this period. From 2021 onward, adjusted equity returned to positive territory, rising markedly to $2,180 million in July 2022 before slightly declining to $1,686 million in June 2023. Despite this recovery, adjusted equity levels remain significantly lower than reported equity, suggesting continued impact from intangible asset adjustments on the company’s net worth.

In summary, the company shows a consistent decline in total assets both reported and adjusted, with adjustments for goodwill magnifying the asset reduction. Shareholders’ equity, when reported, shows some recovery after an initial downturn, whereas adjusted equity reveals periods of negative net worth followed by partial recovery, indicating substantial write-downs or impairments particularly affecting intangible assets. These patterns highlight underlying challenges related to asset valuation and suggest a need for ongoing scrutiny of goodwill and related intangible assets.

The analysis of the company's financial performance over the six-year period reveals significant variability in key profitability and efficiency metrics, both on a reported and adjusted basis.

Total Asset Turnover

The reported total asset turnover ratio shows a declining trend from 0.71 in 2018 to 0.5 in 2023, with minor fluctuations in between, indicating a decrease in the efficiency of asset use to generate revenue. The adjusted total asset turnover, which accounts for goodwill, is consistently higher than the reported figure but follows a similar pattern, peaking at 1.16 in 2022 before a sharp decline to 0.86 in 2023. This suggests that goodwill adjustments reveal a relatively more efficient asset utilization, although the downward trend in recent years is notable.

Financial Leverage

The reported financial leverage steadily decreases from 2.54 in 2018 to 2.08 in 2023, implying reduced reliance on debt financing over time. In contrast, the adjusted financial leverage shows considerable volatility, with a sharp increase to 24.53 in 2021 followed by a decline to 8.54 in 2023. The missing data for 2019 and 2020 complicate trend analysis for the adjusted metric, but the large fluctuations suggest significant changes in the composition of liabilities or equity after goodwill adjustments during this period.

Return on Equity (ROE)

Reported ROE exhibits considerable fluctuation, starting at 5.85% in 2018 and turning negative in 2019 (-7.56%), 2020 (-2.62%), and dramatically declining again in 2023 (-14.55%). Positive values resume in 2021 and 2022, reaching a peak of 12.27%. Adjusted ROE figures, available for fewer years, display even more pronounced volatility, with a peak extraordinarily high at 125.34% in 2021 before plunging to a negative -101.19% in 2023. This indicates that the profitability relative to equity, after considering goodwill, is highly sensitive and potentially influenced by extraordinary items or asset impairments.

Return on Assets (ROA)

Reported ROA mirrors the pattern of ROE but with lower magnitudes, starting positive at 2.31% in 2018, turning negative in 2019 and 2020, recovering to 5.71% in 2022, and dropping sharply to -6.98% in 2023. Adjusted ROA values also show volatility with negative values in multiple years, notably declining to -11.85% in 2023. This reflects fluctuating operational efficiency and asset profitability, which are further accentuated once goodwill adjustments are made.

Overall, the data indicates a company experiencing considerable financial instability and operational challenges over the analyzed period. The reported metrics suggest moderate declines in asset utilization efficiency and profitability with some improvement during 2021-2022, followed by a downturn in 2023. The adjusted figures highlight greater volatility, emphasizing the impact of goodwill and underlying intangible assets on performance measures. The substantial swings in adjusted ROE and leverage ratios underscore potential impairment issues or restructuring events affecting the company’s financial structure and returns in recent years.

The data reveals notable trends in both reported and goodwill-adjusted financial figures over the examined periods.

Total Assets

Reported total assets show a general declining trend from US$29,235 million in 2018 to US$24,429 million in 2023, with minor fluctuations in between. Particularly, the assets decreased steadily from 2018 to 2020, then saw a slight increase in 2021 and 2022 before declining again in 2023.

Adjusted total assets, which likely exclude goodwill, also demonstrate a consistent downward trend from US$19,160 million in 2018 to US$14,392 million in 2023. The decline is more pronounced and continuous, reflecting a substantial reduction in asset base when goodwill is excluded.

Total Asset Turnover

The reported total asset turnover ratio exhibits some volatility. Starting at 0.71 in 2018, it declines to 0.63 in 2019, recovers somewhat to 0.65 in 2020 and 2021, increases to a peak of 0.72 in 2022, but then significantly drops to 0.50 in 2023. This suggests varying efficiency in generating sales from the asset base over time, with a marked decrease in 2023.

The adjusted total asset turnover ratio presents a different picture. It begins at a stronger 1.08 in 2018 and shows minor fluctuations around the one mark through 2021, indicating relatively steady efficiency in asset utilization. The ratio improves to 1.16 in 2022, suggesting enhanced operational efficiency when excluding goodwill. However, a notable decline to 0.86 occurs in 2023, indicating decreased effectiveness in using adjusted assets to generate revenues.

Overall, the data suggests a shrinking asset base both in reported and adjusted terms, with operational efficiency fluctuating but generally declining in the most recent year. The consistent reduction in adjusted total assets alongside decreased adjusted turnover in 2023 may signal challenges in maintaining revenue generation capacity relative to the net asset base when intangible assets are excluded.

The financial data over the reported periods reveal several notable trends regarding the total assets, shareholders’ equity, and financial leverage, both on a reported and goodwill-adjusted basis.

Total Assets

Reported total assets show a general decreasing trend from US$29,235 million in 2018 to US$24,429 million in 2023, indicating a reduction of approximately 16.5% over the six-year period. Adjusted total assets, which exclude goodwill, also decline from US$19,160 million in 2018 to US$14,392 million in 2023, representing a similar downward trajectory. This consistent decrease in asset base suggests an overall contraction or divestiture strategy and possible impairment or write-downs affecting asset valuation.

Shareholders’ Equity

Reported shareholders’ equity decreases from US$11,531 million in 2018 to a low point of US$9,551 million in 2020 but then recovers to US$12,221 million in 2022 before slightly declining again to US$11,723 million in 2023. This fluctuation reflects some volatility yet a general preservation of reported equity levels near their initial values. Conversely, adjusted shareholders’ equity, which accounts for goodwill adjustments, starts at a significantly lower US$1,456 million in 2018, falls into negative territory in 2019 (-109 million) and 2020 (-516 million), indicating potential impairment losses or asset write-downs impacting equity adversely. From 2021 onwards, adjusted equity improves markedly to US$2,180 million in 2022 and remains positive at US$1,686 million in 2023, suggesting a partial recovery in underlying equity after adjusting for intangible impairments.

Financial Leverage

Reported financial leverage, calculated as total assets over shareholders’ equity, trends downward from 2.54 times in 2018 to 2.08 times in 2023. This suggests a reduction in reliance on debt or liabilities relative to equity and potentially an improvement in the capital structure. The adjusted financial leverage ratios exhibit higher volatility and are notably elevated compared to reported figures. Adjusted leverage is extremely high at 13.16 times in 2018, spikes to 24.53 times in 2021, then drops significantly to 7.44 times in 2022 and slightly increases to 8.54 times in 2023. These elevated and fluctuating figures under adjustment indicate that goodwill and intangible asset impairments materially affect the equity base and thus leverage metrics, reflecting increased financial risk during periods of low or negative adjusted equity.

The financial data reveals several notable trends concerning shareholders' equity and return on equity (ROE) for the periods under review.

Shareholders’ Equity

Reported shareholders’ equity exhibits fluctuations across the years. It decreased from $11,531 million in June 2018 to $9,551 million in July 2020, followed by an increase to $12,221 million in July 2022, before a slight decline to $11,723 million in June 2023. This pattern suggests a phase of contraction during the initial years, succeeded by recovery and moderate decline.

Adjusted shareholders’ equity, which presumably accounts for goodwill adjustments, presents a more volatile trend. Initially positive at $1,456 million in June 2018, it turned negative in the subsequent two years (-$109 million in June 2019 and -$516 million in July 2020), indicating potential impairment or write-downs. The figure rebounded positively in July 2021 ($655 million) and further improved by July 2022 ($2,180 million), before a slight reduction in June 2023 ($1,686 million). These movements suggest significant adjustments impacting equity beyond the reported figures, with improvement in more recent years.

Return on Equity (ROE)

Reported ROE shows considerable variability. It starts at a positive 5.85% in June 2018, declines sharply to negative values of -7.56% in June 2019 and -2.62% in July 2020, recovers to positive territory with 7.66% in July 2021 and peaks at 12.27% in July 2022, but then drops steeply to -14.55% in June 2023. This volatility indicates fluctuating profitability and efficiency in generating returns for shareholders during the years.

Adjusted ROE, available for select periods, reveals even more pronounced swings. It is exceptionally high at 46.36% in June 2018, not reported for 2019 and 2020, surges to 125.34% in July 2021, declines yet remains strong at 68.81% in July 2022, and then plunges sharply to -101.19% in June 2023. These extreme fluctuations suggest that the adjustments related to goodwill or other factors materially affect the perceived efficiency and profitability, highlighting periods of substantial gains followed by severe downturn.

Overall, the data indicate that the company experienced periods of both contraction and recovery in equity levels. Meanwhile, return on equity figures, both reported and adjusted, underscore significant volatility and susceptibility to impairment or adjustments associated with goodwill. The negative adjusted equity and ROE values in some years highlight cautionary signals regarding asset valuation and profitability sustainability. The marked improvements in adjusted equity and ROE during 2021 and 2022 suggest recovery phases potentially driven by strategic or operational changes, whereas the negative results in 2023 warrant further investigation into underlying causes.

Total Assets

The reported total assets demonstrate a declining trend over the six-year period, decreasing from 29,235 million USD in mid-2018 to 24,429 million USD by mid-2023. This represents a reduction of approximately 16.4%. Similarly, the adjusted total assets, which exclude goodwill, also follow a downward trajectory, declining from 19,160 million USD in 2018 to 14,392 million USD in 2023. The adjusted figures reveal a more pronounced decline of roughly 24.8%, indicating a consistent contraction in core asset bases.

Return on Assets (ROA)

Reported ROA exhibits considerable volatility across the observed periods. Starting at a positive 2.31% in 2018, the metric falls sharply to negative returns in both 2019 (-2.86%) and 2020 (-0.97%), before rebounding to positive territory in 2021 (3.14%) and reaching a peak of 5.71% in 2022. However, the return declines significantly to a negative 6.98% in 2023. The adjusted ROA, which removes the impact of goodwill, mirrors this fluctuating pattern but with amplified magnitudes. It begins at 3.52% in 2018, plunges to -4.63% in 2019 and -1.6% in 2020, then climbs to 5.11% in 2021 and peaks at 9.25% in 2022. The adjusted ROA collapses more severely to -11.85% in 2023.

Insights

The data indicates an overall contraction in asset size over the six years, with a sharper decline in adjusted total assets suggesting the amortization or impairment of goodwill. Returns on assets are inconsistent, showing periods of recovery followed by steep declines, especially pronounced when goodwill is removed from the calculation. The sharper swings in adjusted ROA imply that intangible assets might have temporarily supported profitability metrics, masking weaker performance in core operations. The significant negative returns in the most recent year suggest notable challenges affecting asset efficiency and profitability.