Builders FirstSource Inc. (NYSE:BLDR)

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Builders FirstSource Inc., effective income tax rate (EITR) reconciliation

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Statutory federal income tax rate	21.00%	21.00%	21.00%	21.00%	21.00%
State income taxes, net of federal income tax	2.30%	3.20%	3.70%	2.80%	4.30%
Stock-based compensation windfall benefit	-0.50%	-0.40%	-0.50%	-0.80%	-1.60%
Permanent difference, 162(m) limitation	0.30%	0.30%	0.50%	0.40%	0.60%
Permanent difference, credits	-0.20%	-0.90%	-1.70%	-2.30%	-4.60%
Permanent difference, other	0.00%	0.20%	0.30%	0.70%	1.40%
Other	0.10%	0.00%	-0.10%	-0.20%	0.20%
Effective tax rate for continuing operations	23.00%	23.40%	23.20%	21.60%	21.30%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The effective income tax rate for continuing operations exhibited a gradual upward trend over the five-year period, rising from 21.30% in 2018 to 23.00% in 2022. While the statutory federal income tax rate remained constant at 21.00% throughout the analysis period, the effective rate consistently exceeded the statutory rate starting in 2019, peaking at 23.40% in 2021.

Impact of Permanent Differences and Credits: The most significant driver of the increasing effective tax rate was the substantial reduction in benefits derived from permanent difference credits. In 2018, credits provided a reduction of 4.60% to the tax rate; however, this benefit diminished steadily each year, reaching a negligible 0.20% by 2022. This erosion of tax credits exerted consistent upward pressure on the overall effective tax rate.
State Income Tax Trends: State income taxes, net of federal income tax, showed a general downward trajectory, moving from 4.30% in 2018 to 2.30% in 2022. This decline served as a partial offset to the loss of tax credits and other benefits, preventing a more aggressive increase in the effective tax rate.
Stock-Based Compensation and Other Adjustments: The windfall benefit from stock-based compensation decreased in magnitude from a 1.60% reduction in 2018 to a 0.50% reduction in 2022, further contributing to the upward shift in the effective rate. Additionally, permanent differences categorized as other saw a decline from 1.40% in 2018 to 0.20% in 2021, adding to the overall trend of diminishing tax advantages over the period.
Analysis of Rate Stability: The 162(m) limitation remained a relatively stable additive factor, fluctuating slightly between 0.30% and 0.60%. Consequently, the volatility and ultimate direction of the effective tax rate were primarily dictated by the interplay between declining state tax burdens and the sharp reduction in available tax credits.

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Builders FirstSource Inc., components of deferred tax assets and liabilities

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Accrued expenses	33,146)	31,828)	19,182)	8,219)	10,019)
Insurance reserves	33,824)	32,080)	16,582)	14,277)	13,245)
Stock-based compensation expense	5,696)	5,008)	3,549)	3,325)	4,770)
Accounts receivable	16,480)	8,742)	4,726)	3,799)	3,892)
Inventories	14,965)	10,387)	6,152)	5,394)	13,348)
Operating loss and credit carryforwards	14,221)	18,356)	10,812)	13,821)	38,813)
Operating lease liabilities	119,232)	113,273)	70,216)	74,650)	—)
Other	4,751)	3,098)	3,746)	1,677)	—)
Deferred tax assets, before valuation allowance	242,315)	222,772)	134,965)	125,162)	84,087)
Valuation allowance	—)	(2,573)	(2,409)	(2,409)	(2,409)
Deferred tax assets	242,315)	220,199)	132,556)	122,753)	81,678)
Prepaid expenses	(7,953)	(8,960)	(3,914)	(2,393)	(2,845)
Goodwill and other intangible assets	(231,223)	(307,165)	(47,490)	(37,426)	(28,055)
Property, plant and equipment	(158,173)	(156,315)	(57,353)	(37,991)	(26,670)
Operating lease right-of-use assets	(114,626)	(109,880)	(68,641)	(73,171)	—)
Other	—)	—)	—)	—)	(1,342)
Deferred tax liabilities	(511,975)	(582,320)	(177,398)	(150,981)	(58,912)
Net deferred tax asset (liability)	(269,660)	(362,121)	(44,842)	(28,228)	22,766)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The financial data reveals a fundamental shift in the deferred tax position, moving from a net deferred tax asset of $22.8 million in 2018 to a net deferred tax liability of $269.7 million by 2022. This transition is characterized by a substantial expansion of deferred tax liabilities that significantly outpaced the growth of deferred tax assets over the five-year period.

Deferred Tax Assets Analysis: Deferred tax assets, before valuation allowances, exhibited a consistent upward trend, increasing from $84.1 million in 2018 to $242.3 million in 2022. Key drivers of this growth include accrued expenses, which rose from $10.0 million to $33.1 million, and insurance reserves, which increased from $13.2 million to $33.8 million. Accounts receivable related assets showed marked growth, expanding from $3.9 million in 2018 to $16.5 million in 2022. Furthermore, the introduction of operating lease liabilities in 2019 added a significant component that grew to $119.2 million by the end of 2022. Conversely, operating loss and credit carryforwards fluctuated, peaking in 2018 at $38.8 million before settling at $14.2 million in 2022.
Deferred Tax Liabilities Analysis: Deferred tax liabilities experienced an aggressive increase, rising from $58.9 million in 2018 to a peak of $582.3 million in 2021, before moderating to $512.0 million in 2022. The most significant driver was the increase in liabilities related to goodwill and other intangible assets, which surged from $28.1 million in 2018 to $307.2 million in 2021. Property, plant, and equipment liabilities also grew substantially from $26.7 million to $158.2 million over the period. Additionally, operating lease right-of-use assets emerged as a major liability starting in 2019, reaching $114.6 million by 2022.
Net Position and Valuation Allowance: The net deferred tax position transitioned from an asset in 2018 to a liability in 2019, with the deficit deepening to $362.1 million in 2021 before recovering to $269.7 million in 2022. The valuation allowance remained relatively stagnant between $2.4 million and $2.6 million from 2018 through 2021 but was eliminated entirely by December 31, 2022, suggesting an increased expectation that the deferred tax assets will be fully realized.

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Builders FirstSource Inc., deferred tax assets and liabilities, classification

US$ in thousands

		Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
	Deferred tax assets	—)	—)	4,653)	8,417)	22,766)
	Deferred tax liabilities	269,660)	362,121)	49,495)	36,645)	—)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The company's deferred tax position underwent a significant structural shift between 2018 and 2022, transitioning from a net deferred tax asset position to a substantial net deferred tax liability. This evolution indicates a fundamental change in the timing differences between financial reporting and tax accounting.

Deferred Tax Assets: A consistent downward trend is observed from 2018 through 2020, with values decreasing from 22,766 thousand US$ to 4,653 thousand US$. This represents a reduction of approximately 79.6% over three years, suggesting the utilization or reversal of previously recognized tax benefits.
Deferred Tax Liabilities: Deferred tax liabilities experienced rapid growth, escalating from 36,645 thousand US$ in 2019 to a peak of 362,121 thousand US$ in 2021. While there was a subsequent decrease to 269,660 thousand US$ in 2022, the liability levels remained significantly elevated compared to the 2019 and 2020 periods.
Net Tax Position Analysis: The net deferred tax balance shifted from a positive asset position in 2018 to a liability position by 2019. The magnitude of the liabilities expanded aggressively between 2020 and 2021, increasing by more than 700% in a single fiscal year, which typically aligns with significant capital expenditures, asset acquisitions, or changes in depreciation methods that create larger temporary differences.

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Builders FirstSource Inc., Financial Data: Reported vs. Adjusted

Builders FirstSource Inc., adjustments to financial statements

US$ in thousands

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Adjustment to Total Assets
Total assets (as reported)	10,595,160)	10,714,343)	4,173,671)	3,249,490)	2,932,309)
Less: Noncurrent deferred tax assets, net	—)	—)	4,653)	8,417)	22,766)
Total assets (adjusted)	10,595,160)	10,714,343)	4,169,018)	3,241,073)	2,909,543)
Adjustment to Total Liabilities
Total liabilities (as reported)	5,632,594)	5,911,862)	3,020,888)	2,424,537)	2,335,971)
Less: Noncurrent deferred tax liabilities, net	269,660)	362,121)	49,495)	36,645)	—)
Total liabilities (adjusted)	5,362,934)	5,549,741)	2,971,393)	2,387,892)	2,335,971)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)	4,962,566)	4,802,481)	1,152,783)	824,953)	596,338)
Less: Net deferred tax assets (liabilities)	(269,660)	(362,121)	(44,842)	(28,228)	22,766)
Stockholders’ equity (adjusted)	5,232,226)	5,164,602)	1,197,625)	853,181)	573,572)
Adjustment to Net Income
Net income (as reported)	2,749,369)	1,725,416)	313,537)	221,809)	205,191)
Add: Deferred income tax expense (benefit)	(92,461)	(34,573)	16,614)	50,994)	51,823)
Net income (adjusted)	2,656,908)	1,690,843)	330,151)	272,803)	257,014)

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

An analysis of the financial position from 2018 to 2022 reveals a substantial expansion in the scale of the balance sheet, characterized by a significant surge in both assets and liabilities starting in 2021. The removal of deferred taxes as an adjustment mechanism provides a normalized view of the company's equity and income, filtering out the accounting effects of temporary timing differences between book and tax reporting.

Impact on Total Assets: Total assets experienced rapid growth, increasing from approximately 2.93 billion USD in 2018 to a peak of 10.71 billion USD in 2021. The adjustments to remove deferred tax assets resulted in a slight reduction of total assets in the earlier years (2018-2020). However, by 2021 and 2022, the reported and adjusted asset values converged, indicating that deferred tax assets became a negligible component of the overall asset base relative to the total scale of the company.
Impact on Total Liabilities: A consistent downward adjustment is observed in total liabilities from 2019 through 2022. While reported liabilities grew to 5.91 billion USD in 2021, the adjusted liabilities were lower at 5.55 billion USD. This indicates a significant presence of deferred tax liabilities. The gap between reported and adjusted liabilities widened substantially in 2021 and 2022, suggesting that the removal of these tax-related obligations significantly lowers the perceived leverage of the company.
Adjustments to Stockholders' Equity: Stockholders' equity demonstrated an aggressive upward trend, rising from 596 million USD in 2018 to nearly 5 billion USD by 2022. Starting in 2019, the adjusted equity consistently exceeded the reported equity. This divergence is a direct result of the removal of deferred tax liabilities outweighing the removal of deferred tax assets. By 2022, adjusted equity reached 5.23 billion USD compared to the reported 4.96 billion USD, representing a positive normalization of the company's net worth.
Net Income Variance: Reported net income grew exponentially, moving from 205 million USD in 2018 to 2.75 billion USD in 2022. The relationship between reported and adjusted net income shifted over the five-year period. From 2018 to 2020, the removal of deferred taxes resulted in higher adjusted net income. Conversely, in 2021 and 2022, the adjusted net income was lower than the reported figures, suggesting a reversal in the nature of the deferred tax impact on the annual earnings.

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Builders FirstSource Inc., Financial Ratios: Reported vs. Adjusted

Builders FirstSource Inc., adjusted financial ratios

	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
Net Profit Margin
Reported net profit margin	12.10%	8.67%	3.66%	3.05%	2.66%
Adjusted net profit margin	11.69%	8.50%	3.86%	3.75%	3.33%
Total Asset Turnover
Reported total asset turnover	2.14	1.86	2.05	2.24	2.63
Adjusted total asset turnover	2.14	1.86	2.05	2.25	2.65
Financial Leverage
Reported financial leverage	2.14	2.23	3.62	3.94	4.92
Adjusted financial leverage	2.02	2.07	3.48	3.80	5.07
Return on Equity (ROE)
Reported ROE	55.40%	35.93%	27.20%	26.89%	34.41%
Adjusted ROE	50.78%	32.74%	27.57%	31.97%	44.81%
Return on Assets (ROA)
Reported ROA	25.95%	16.10%	7.51%	6.83%	7.00%
Adjusted ROA	25.08%	15.78%	7.92%	8.42%	8.83%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

The financial ratios demonstrate a significant shift in operational efficiency and capital structure between 2018 and 2022. A clear trend of increasing profitability is evident, while the influence of deferred taxes on the reported figures diminished over the analyzed period, leading to a convergence between reported and adjusted metrics by 2022.

Profitability Margins: Both reported and adjusted net profit margins exhibit a strong upward trajectory. The reported margin grew from 2.66% in 2018 to 12.10% in 2022. While adjusted margins were higher in the early years, the gap narrowed significantly over time, indicating that the impact of deferred tax adjustments on net profitability became less material in the latter part of the period.
Asset Utilization and Efficiency: Total asset turnover experienced a gradual decline from 2018 (2.63) through 2021 (1.86), before recovering to 2.14 in 2022. The negligible difference between reported and adjusted asset turnover ratios suggests that deferred tax accounts had minimal impact on the measurement of asset efficiency.
Financial Leverage and Solvency: A consistent downward trend in financial leverage is observed, with the reported ratio decreasing from 4.92 in 2018 to 2.14 in 2022. This indicates a substantial reduction in the company's reliance on debt to finance its assets. The adjusted leverage ratios mirror this decline, though they remained slightly lower than reported figures in the final two years.
Returns on Equity and Assets: Return on Equity (ROE) and Return on Assets (ROA) both show an acceleration in growth starting in 2021. Reported ROE rose sharply from 27.20% in 2020 to 55.40% in 2022, while reported ROA increased from 7.51% in 2020 to 25.95% in 2022. In the early period (2018-2019), adjusted ROE and ROA were notably higher than reported figures, suggesting that deferred tax liabilities may have previously suppressed reported returns.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income	2,749,369)	1,725,416)	313,537)	221,809)	205,191)
Net sales	22,726,418)	19,893,856)	8,558,874)	7,280,431)	7,724,771)
Profitability Ratio
Net profit margin¹	12.10%	8.67%	3.66%	3.05%	2.66%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	2,656,908)	1,690,843)	330,151)	272,803)	257,014)
Net sales	22,726,418)	19,893,856)	8,558,874)	7,280,431)	7,724,771)
Profitability Ratio
Adjusted net profit margin²	11.69%	8.50%	3.86%	3.75%	3.33%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Net profit margin = 100 × Net income ÷ Net sales
= 100 × 2,749,369 ÷ 22,726,418 = 12.10%

² Adjusted net profit margin = 100 × Adjusted net income ÷ Net sales
= 100 × 2,656,908 ÷ 22,726,418 = 11.69%

A substantial acceleration in profitability and margin expansion is evident over the five-year period ending December 31, 2022. The financial trajectory is characterized by steady growth through 2020, followed by an exponential increase in both absolute net income and profit margins during 2021 and 2022.

Adjusted Net Profit Margin Trend: The adjusted net profit margin exhibited a consistent upward trajectory, rising from 3.33% in 2018 to 11.69% in 2022. A significant inflection point occurred between 2020 and 2021, where the margin more than doubled from 3.86% to 8.50%, indicating a marked improvement in earnings quality and operational efficiency.
Net Income Growth Patterns: Both reported and adjusted net income experienced rapid growth, particularly in the final two years of the period. Adjusted net income grew from 257,014 thousand dollars in 2018 to 2,656,908 thousand dollars in 2022. The most aggressive expansion took place between 2020 and 2021, with adjusted net income increasing by approximately 412% in a single fiscal year.
Comparative Analysis of Reported vs. Adjusted Metrics: A reversal in the relationship between reported and adjusted figures is observable. Between 2018 and 2020, adjusted net income and adjusted net profit margins were consistently higher than the reported values. However, in 2021 and 2022, reported net income and reported profit margins surpassed the adjusted figures. This divergence suggests that in the latter years, the impact of non-recurring gains or favorable tax adjustments outweighed the non-recurring expenses typically excluded in adjusted reporting.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net sales	22,726,418)	19,893,856)	8,558,874)	7,280,431)	7,724,771)
Total assets	10,595,160)	10,714,343)	4,173,671)	3,249,490)	2,932,309)
Activity Ratio
Total asset turnover¹	2.14	1.86	2.05	2.24	2.63
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Net sales	22,726,418)	19,893,856)	8,558,874)	7,280,431)	7,724,771)
Adjusted total assets	10,595,160)	10,714,343)	4,169,018)	3,241,073)	2,909,543)
Activity Ratio
Adjusted total asset turnover²	2.14	1.86	2.05	2.25	2.65

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 22,726,418 ÷ 10,595,160 = 2.14

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 22,726,418 ÷ 10,595,160 = 2.14

An analysis of the asset base and asset utilization from 2018 to 2022 reveals a period of significant expansion followed by a recovery in operational efficiency. Total assets experienced steady growth between 2018 and 2020, followed by a substantial increase in 2021, where reported total assets rose from approximately 4.17 billion US$ to 10.71 billion US$. This expansion was followed by a slight contraction in 2022 to 10.60 billion US$.

Adjusted Total Asset Turnover Trends: The adjusted total asset turnover exhibited a consistent downward trend from 2018 to 2021, declining from a high of 2.65 to a low of 1.86. This decline suggests that the growth in the asset base outpaced the growth in revenue during this period, leading to a reduction in asset efficiency. However, a reversal of this trend occurred in 2022, as the ratio improved to 2.14, indicating an increase in the company's ability to generate revenue from its assets following the massive expansion of 2021.
Asset Base Scaling: The scale of adjusted total assets increased by approximately 266% between 2018 and 2021. The sharp spike observed in 2021 represents the most significant change in the financial structure, coinciding with the lowest point of asset turnover. The subsequent stabilization of assets in 2022, coupled with the rising turnover ratio, points toward a phase of optimization of the newly acquired or expanded asset base.
Comparison of Reported and Adjusted Metrics: There is a high degree of convergence between reported and adjusted figures. In 2018, the adjusted total asset turnover was slightly higher at 2.65 compared to the reported 2.63. By 2021 and 2022, the reported and adjusted values for both total assets and asset turnover became identical, suggesting that the adjustments previously necessary for a normalized view of asset efficiency became negligible as the asset base scaled.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Total assets	10,595,160)	10,714,343)	4,173,671)	3,249,490)	2,932,309)
Stockholders’ equity	4,962,566)	4,802,481)	1,152,783)	824,953)	596,338)
Solvency Ratio
Financial leverage¹	2.14	2.23	3.62	3.94	4.92
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted total assets	10,595,160)	10,714,343)	4,169,018)	3,241,073)	2,909,543)
Adjusted stockholders’ equity	5,232,226)	5,164,602)	1,197,625)	853,181)	573,572)
Solvency Ratio
Adjusted financial leverage²	2.02	2.07	3.48	3.80	5.07

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= 10,595,160 ÷ 4,962,566 = 2.14

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= 10,595,160 ÷ 5,232,226 = 2.02

A significant expansion of the balance sheet is observed between 2018 and 2022, characterized by a substantial increase in both total assets and stockholders' equity. Total assets grew steadily from 2018 to 2020, followed by a sharp increase in 2021, where assets more than doubled to exceed 10.7 billion US dollars. Stockholders' equity mirrored this trajectory, experiencing a surge in 2021, which contributed to a fundamental shift in the organization's capital structure.

Financial Leverage Trends: A consistent downward trend is evident in both reported and adjusted financial leverage ratios over the five-year period. Reported financial leverage decreased from 4.92 in 2018 to 2.14 in 2022, while adjusted financial leverage fell from 5.07 to 2.02 during the same timeframe. This reduction indicates a systematic deleveraging process and a strengthened solvency position.
Comparative Analysis of Adjusted vs. Reported Metrics: The variance between reported and adjusted financial leverage was most prominent in the earlier periods, particularly in 2018, where the adjusted ratio was higher than the reported ratio. However, as the equity base expanded significantly in 2021 and 2022, the gap between reported and adjusted leverage narrowed. By 2022, the adjusted financial leverage of 2.02 closely aligns with the reported leverage of 2.14, suggesting that adjustments have a diminishing relative impact on the leverage profile as the scale of the balance sheet increased.
Asset and Equity Correlation: The rapid increase in stockholders' equity relative to the increase in total assets starting in 2021 is the primary driver for the sharp decline in leverage ratios. The equity growth from approximately 1.15 billion US dollars in 2020 to over 4.8 billion US dollars in 2021 represents a substantial strengthening of the equity cushion, thereby reducing the overall financial risk profile.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income	2,749,369)	1,725,416)	313,537)	221,809)	205,191)
Stockholders’ equity	4,962,566)	4,802,481)	1,152,783)	824,953)	596,338)
Profitability Ratio
ROE¹	55.40%	35.93%	27.20%	26.89%	34.41%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	2,656,908)	1,690,843)	330,151)	272,803)	257,014)
Adjusted stockholders’ equity	5,232,226)	5,164,602)	1,197,625)	853,181)	573,572)
Profitability Ratio
Adjusted ROE²	50.78%	32.74%	27.57%	31.97%	44.81%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × 2,749,369 ÷ 4,962,566 = 55.40%

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × 2,656,908 ÷ 5,232,226 = 50.78%

An examination of financial performance from 2018 to 2022 reveals a period of exponential growth in profitability and a substantial expansion of the capital base, culminating in a significant increase in return on equity (ROE) by the end of the period.

Net Income Trajectory: Reported net income demonstrated a consistent upward trend, increasing from 205.19 million US dollars in 2018 to 2.75 billion US dollars in 2022. The most aggressive growth occurred between 2020 and 2021, where net income rose from 313.54 million US dollars to 1.73 billion US dollars, representing a sharp acceleration in earnings capacity.
Equity Base Expansion: Stockholders' equity grew from 596.34 million US dollars in 2018 to 4.96 billion US dollars in 2022. A pivotal increase is noted between 2020 and 2021, during which reported equity grew more than fourfold, moving from 1.15 billion US dollars to 4.80 billion US dollars.
Return on Equity (ROE) Performance: Reported ROE exhibited a fluctuating but ultimately upward path, dipping from 34.41% in 2018 to a low of 26.89% in 2019, before climbing to 55.40% in 2022. Adjusted ROE followed a similar pattern, decreasing from 44.81% in 2018 to 27.57% in 2020, then recovering strongly to reach 50.78% by 2022.
Comparative Analysis of Adjusted vs. Reported Metrics: A divergence is observed between reported and adjusted figures over the five-year span. In 2018, adjusted ROE was substantially higher than reported ROE, driven by a higher adjusted net income and a lower adjusted equity base. By 2021 and 2022, this relationship inverted; reported ROE exceeded adjusted ROE because adjusted stockholders' equity became higher than reported equity, while adjusted net income fell slightly below reported net income.

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	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019	Dec 31, 2018
As Reported
Selected Financial Data (US$ in thousands)
Net income	2,749,369)	1,725,416)	313,537)	221,809)	205,191)
Total assets	10,595,160)	10,714,343)	4,173,671)	3,249,490)	2,932,309)
Profitability Ratio
ROA¹	25.95%	16.10%	7.51%	6.83%	7.00%
Adjusted for Deferred Taxes
Selected Financial Data (US$ in thousands)
Adjusted net income	2,656,908)	1,690,843)	330,151)	272,803)	257,014)
Adjusted total assets	10,595,160)	10,714,343)	4,169,018)	3,241,073)	2,909,543)
Profitability Ratio
Adjusted ROA²	25.08%	15.78%	7.92%	8.42%	8.83%

Based on: 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31).

2022 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 2,749,369 ÷ 10,595,160 = 25.95%

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × 2,656,908 ÷ 10,595,160 = 25.08%

Between 2018 and 2022, a substantial escalation in both profitability and asset utilization is observed. While growth remained moderate from 2018 through 2020, a significant inflection point occurred in 2021, resulting in an exponential increase in net income and a corresponding expansion of the asset base.

Net Income Trajectory: Reported net income exhibited a sharp upward trend, increasing from 205.19 million in 2018 to 2.75 billion in 2022. The most pronounced growth occurred between 2020 and 2021, where reported net income rose from 313.54 million to 1.73 billion. Adjusted net income followed a similar pattern, although it remained slightly below reported figures in 2021 and 2022, ending the period at 2.66 billion.
Asset Base Evolution: Total assets grew steadily from 2.93 billion in 2018 to 4.17 billion in 2020. A dramatic expansion is noted in 2021, with reported assets increasing to 10.71 billion, suggesting a major capital event or acquisition. Asset levels remained relatively stable into 2022, with a slight decrease to 10.60 billion.
Return on Assets (ROA) Analysis: Reported ROA remained relatively flat between 2018 and 2020, fluctuating between 6.83% and 7.51%. Starting in 2021, the ratio accelerated significantly to 16.10% and further climbed to 25.95% by 2022. Adjusted ROA mirrored this acceleration, rising from 7.92% in 2020 to 25.08% in 2022. The substantial increase in ROA indicates that the growth in net income significantly outpaced the expansion of the asset base, reflecting a marked improvement in asset productivity and overall financial efficiency.

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