Texas Pacific Land Corp. (NYSE:TPL)

Current Income Tax Expense

The current income tax expense demonstrated fluctuations over the observed periods. Beginning at $57,492 thousand in 2019, it decreased to $46,002 thousand in 2020, indicating a reduction of approximately 20%. This was followed by a substantial increase to $93,265 thousand in 2021, effectively doubling from the previous year. The expense continued to rise to its peak at $121,230 thousand in 2022 before slightly declining to $110,517 thousand in 2023. This trend suggests variability possibly related to changes in taxable income or tax rates impacting the company over these years.

Deferred Expense (Benefit)

The deferred income tax expense (benefit) displayed a more volatile and inconsistent pattern. Starting with a positive expense of $26,035 thousand in 2019, it shifted to a benefit reflected by negative figures of $2,389 thousand in 2020 and $228 thousand in 2021. In 2022 and 2023, the company experienced a slight reversal, registering modest deferred expenses of $1,263 thousand and $1,399 thousand respectively. This variability could indicate timing differences in recognizing tax liabilities and assets or changes in deferred tax assets and liabilities driven by alterations in tax legislation or the company’s financial activities.

Total Income Tax Expense

The overall income tax expense, comprised of current and deferred components, mirrored the volatility seen in the individual parts. It started at $83,527 thousand in 2019, then nearly halved to $43,613 thousand in 2020, driven primarily by the reduction in current tax expense and the reversal of deferred tax from expense to benefit. The tax expense increased sharply again in 2021 to $93,037 thousand and continued rising to a peak of $122,493 thousand in 2022. In 2023, a moderate decline to $111,916 thousand was observed. The total tax expense behavior underscores the influence of fluctuating current and deferred tax charges, reflecting the company’s changing tax position and possibly its underlying profitability through these periods.

The data reflects the tax rate trends for the periods ending from December 31, 2019, to December 31, 2023. The U.S. federal income tax rate remains constant at 21% throughout all periods, indicating a stable statutory tax framework applicable to the company during these years.

The effective tax rate, however, exhibits some variability in relation to the steady federal rate. Starting at 20.8% in 2019, the effective tax rate slightly decreases to 19.9% in 2020, suggesting some form of tax benefit, deferral, or adjustment during that year. In 2021, there is a notable increase to 25.6%, indicating an effective tax burden considerably above the statutory rate. This could be due to either lower deductible expenses, increased non-deductible items, or other tax adjustments impacting the company’s tax liabilities.

Following the spike in 2021, the effective tax rate decreases again in 2022 to 21.5% and remains relatively stable at 21.6% in 2023. These rates are close to the statutory 21%, implying that the company’s tax position normalized after the 2021 anomaly and aligned more closely with the federal income tax rate in the most recent periods.

Overall, the data shows that while the statutory federal tax rate was stable, the effective tax rate fluctuated, particularly with a significant increase in 2021, followed by a return to a level consistent with the statutory rate in subsequent years. This trend may reflect changes in taxable income composition, tax planning strategies, or one-time tax effects within the measured periods.

The analysis of the financial data reveals several notable trends and shifts across the periods from 2019 to 2023.

Unearned Revenue

The balance of unearned revenue shows an overall upward trend, starting at 3,741 thousand US dollars in 2019 and increasing to 6,717 thousand US dollars by 2023. Despite a slight dip in 2021, the growth in this liability suggests an expanding base of advance payments or deferred income.

Pension Plan Liability and Asset

The pension plan liability was recorded in 2020 and 2021, with values of 452 thousand and 128 thousand US dollars respectively, before disappearing from the books in subsequent years. Conversely, the pension plan asset appeared as a negative liability starting in 2022, reaching -767 thousand US dollars by 2023. This shift may indicate a change in pension accounting, from a liability position to a recognized asset, reflecting favorable plan-funded status or revaluation effects.

Stock Compensation

Stock compensation expenses emerged in 2022 with 1,256 thousand US dollars and increased notably to 2,097 thousand US dollars in 2023. This upward trajectory reveals a growing allocation of stock-based remuneration.

Other Items

The category defined as "Other" recorded minimal activity in 2021 and 2022 but surged to 760 thousand US dollars in 2023, indicating increased transactions or adjustments classified under this heading.

Deferred Tax Assets

Deferred tax assets showed a generally increasing pattern, from 3,741 thousand US dollars in 2019 to 9,574 thousand in 2023, notwithstanding a slight decrease in 2021. This rise reflects growth in deductible temporary differences or carryforwards.

Property, Plant, and Equipment (PPE)

The net balance of PPE remained negative throughout the period, ranging from -17,030 thousand US dollars in 2019 to -17,532 thousand in 2023. While fluctuations occurred, the overall trend suggests relatively stable net carrying values with slight additional reductions or impairments over time.

Real Estate and Royalty Interests

This item showed a steady increase in net negative value from -27,528 thousand US dollars in 2019 to -33,215 thousand US dollars by 2023. The consistent increase in negative balance indicates ongoing additions or revaluations reflecting growing obligations or liabilities in this area.

Other, Net

The "Other, net" category showed minimal negative values in 2019 and 2020, no data in some years, then moved to a significant negative value of -425 thousand US dollars in 2023. This suggests either new liabilities coming under this category or reclassifications.

Deferred Tax Liabilities and Deferred Taxes Payable

Both deferred tax liabilities and deferred taxes payable exhibited increasing negative balances over the five years. Deferred tax liabilities rose from -44,568 thousand US dollars in 2019 to -51,939 thousand in 2023. Deferred taxes payable similarly increased from -40,827 thousand to -42,365 thousand in the same period. This growth implies a rising recognition of taxable temporary differences and tax obligations deferred to future periods.

In summary, the financial data indicates growth in deferred income and deferred tax assets, reflecting increasing future economic benefits. At the same time, deferred tax liabilities and tax payables have similarly increased, showing a rising future tax burden. The pension plan has transitioned from a liability to an asset position. Stock-based compensation is becoming a more significant expense, and certain miscellaneous categories have experienced notable growth, potentially warranting further detailed scrutiny.

The analysis of the deferred taxes payable over the five-year period reveals a relatively stable trend with slight fluctuations. Initially, in 2019, deferred taxes payable stood at USD 40,827 thousand. In the following year, there was a modest decrease to USD 38,728 thousand.

Subsequently, in 2021, the figure experienced a minor increase to USD 38,948 thousand, remaining close to the previous year's level. The upward trend continued in 2022, with the amount rising to USD 41,151 thousand, surpassing the 2019 value.

By the end of 2023, deferred taxes payable further increased to USD 42,365 thousand, indicating a gradual accumulation over the most recent years. Overall, the deferred taxes payable have shown relatively mild volatility but an upward trajectory in the last two years of the period reviewed.

Trend Summary

A slight overall increase from 2019 to 2023, with a dip in 2020 and 2021 followed by consistent rises in 2022 and 2023.

Potential Insight

The steady increase in deferred taxes payable in later years might reflect changes in taxable temporary differences, tax rates, or company operations influencing deferred tax liabilities.

The data presents a detailed view of the reported and deferred income tax adjusted financial figures over a five-year period, focusing on liabilities, equity, and net income. Several trends and patterns emerge from this set of financial metrics.

Total Liabilities

Reported total liabilities indicate a generally increasing trend from 86,039 thousand US dollars in 2019 to 113,202 thousand US dollars in 2023. There was a notable spike in 2021, reaching 112,353 thousand, followed by a decrease in 2022 before rising again in 2023. Adjusted total liabilities follow a similar pattern but remain consistently lower than reported liabilities, reflecting the adjustments made for deferred taxes. Adjusted liabilities rose from 45,212 thousand in 2019 to 70,837 thousand in 2023, showing an overall upward trend with some fluctuations.

Total Equity

Reported total equity shows strong growth over the period, peaking at 1,043,196 thousand US dollars in 2023, up from 512,137 thousand in 2019. The growth was somewhat uneven, with a dip in 2020 before accelerating significantly in the subsequent years. Adjusted total equity also exhibits a consistent increasing trend, starting at 552,964 thousand in 2019 and reaching 1,085,561 thousand in 2023. Notably, adjusted equity values are higher than reported equity, suggesting that deferred tax adjustments increase the shareholder equity base.

Net Income

Reported net income showed volatility, starting high at 318,728 thousand in 2019, dropping significantly in 2020 to 176,049 thousand, recovering somewhat in 2021 and 2022, and tapering off slightly in 2023 at 405,645 thousand. Adjusted net income closely parallels reported net income, with minor variations due to tax adjustments. Both reported and adjusted net incomes suggest a recovery after 2020 with a peak in 2022, followed by a modest decline in 2023.

Overall, the data suggests that the company has been increasing its equity base substantially over the five years, while liabilities have also grown but at a more moderate pace. The adjustments for deferred income taxes have led to higher equity and lower liabilities, indicating the impact of these accounting treatments on the financial position. Net income demonstrates sensitivity to annual performance variations, particularly a marked reduction in 2020, likely linked to external factors affecting that year, with a subsequent recovery phase.

The data reveals several notable trends in profitability, leverage, and returns over the five-year period.

Net Profit Margin

Both reported and adjusted net profit margins fluctuated moderately but generally remained strong throughout the period. Reported margins peaked at 66.88% in 2022 before slightly declining to 64.23% in 2023. Adjusted margins exhibited a similar trajectory, rising from 70.29% in 2019 to 67.07% in 2022, then decreasing modestly to 64.45% in 2023. The close alignment between reported and adjusted figures suggests minimal impact from deferred or other income tax adjustments on net profitability.

Financial Leverage

Financial leverage displayed a gradual decline over the observed periods. Reported leverage decreased from 1.17 in 2019 to 1.11 in 2023, indicating a slight reduction in the use of debt relative to equity. Adjusted leverage followed a comparable downward trend, falling from 1.08 to 1.07 across the same timeline. This suggests a subtle shift toward a more conservative capital structure or reduced dependence on borrowing.

Return on Equity (ROE)

Both reported and adjusted ROE experienced significant volatility. The reported ROE fell sharply from 62.23% in 2019 to 36.28% in 2020, partially recovering to 57.75% in 2022 before declining again to 38.88% in 2023. Adjusted ROE mirrors this pattern with slightly lower values, indicating the effect of income tax or accounting adjustments. Despite fluctuations, ROE remained relatively high, reflecting strong profitability generation relative to shareholder equity, though with increased variability in recent years.

Return on Assets (ROA)

ROA values also showed notable variability, decreasing markedly from 53.28% (reported) and 57.64% (adjusted) in 2019 to around 30% in 2020, then partially recovering through 2022 before declining again in 2023. The adjusted ROA remains slightly higher than the reported figure across most periods, indicating that tax or accounting adjustments have a moderate, consistent influence on asset profitability measures.

In summary, the company maintained strong profitability margins and returns throughout the analyzed period but experienced considerable volatility in ROE and ROA, particularly around 2020. The gradual decrease in financial leverage suggests a modest move towards lower financial risk. The alignment between reported and adjusted values across metrics indicates that income tax and deferred tax adjustments have only a marginal impact on the core financial performance indicators measured.

Net Income Trends

The reported net income displayed notable fluctuations over the five-year period. Beginning at approximately $318.7 million in 2019, it declined sharply to about $176.0 million in 2020. This was followed by a recovery to around $270.0 million in 2021, then a significant increase to $446.4 million in 2022, before experiencing a slight decrease to $405.6 million in 2023. The adjusted net income mirrored this pattern closely, starting at $344.8 million in 2019, dropping to $173.7 million in 2020, then rising to $269.8 million in 2021, peaking at $447.6 million in 2022, and marginally declining to $407.0 million in 2023.

Net Profit Margin Analysis

The reported net profit margin showed a downward trend from 2019 to 2020, declining from 64.98% to 58.19%. It then experienced moderate improvement in 2021 to 59.87% and further growth reaching its highest point at 66.88% in 2022. In 2023, the margin retreated slightly to 64.23%. The adjusted net profit margin followed a similar trajectory, starting higher at 70.29% in 2019, dropping significantly to 57.4% in 2020, remaining nearly flat in 2021 at 59.82%, then ascending to 67.07% in 2022, before a mild decline to 64.45% in 2023.

Comparative Observations Between Reported and Adjusted Figures

Adjusted net income generally exceeded reported net income across all years, though the difference reduced over time. Similarly, adjusted net profit margins were consistently higher than reported margins, particularly notable in 2019 and 2020. This suggests that deferred income tax adjustments had a more significant impact in earlier periods, which diminished in later years, indicating perhaps a stabilization or normalization of tax effects on reported earnings.

Overall Insights

The financial performance exhibited considerable volatility with a major downturn in 2020 followed by a strong recovery in 2021 and 2022. Both profitability and income levels peaked in 2022 before experiencing slight declines in 2023. The alignment and trends between reported and adjusted metrics imply that tax-related adjustments modestly enhance the understanding of the company's earnings but not enough to alter the underlying performance trends substantially.

Total Equity Trends

Both reported and adjusted total equity demonstrate a consistent upward trend over the five-year period. Reported total equity rose from approximately 512 million US dollars at the end of 2019 to over 1 billion US dollars by the end of 2023, showing substantial growth. Adjusted total equity follows a similar pattern but consistently reports higher values than the reported figures, increasing from about 553 million US dollars in 2019 to nearly 1.09 billion US dollars in 2023. The gap between reported and adjusted figures widens slightly over time, indicating growing deferred income tax adjustments impacting total equity.

Financial Leverage Trends

Both reported and adjusted financial leverage ratios remain relatively stable throughout the period but exhibit a slight downward trend, suggesting a modest reduction in leverage. Reported financial leverage starts at 1.17 in 2019, fluctuates minimally but declines to 1.11 in 2023. Adjusted financial leverage is consistently lower than reported leverage, beginning at 1.08 in 2019 and gradually reducing to 1.07 by 2023. The consistent difference between reported and adjusted leverage ratios implies that the deferred tax adjustments contribute to a slightly more conservative assessment of leverage.

Overall Insights

The upward movement in total equity, both reported and adjusted, signals strengthening capital base and financial position over the analyzed period. Meanwhile, the gradual decrease in financial leverage ratios points to a conservative approach towards debt relative to equity or improved capacity to service liabilities. The presence of deferred income tax adjustments leads to higher equity values and slightly lower leverage ratios in the adjusted figures, suggesting these adjustments reflect positive impacts on the company’s net worth and balance sheet strength.

Net Income Trends

The reported net income exhibited notable fluctuations over the five-year period. After a significant decline from 318,728 thousand US dollars in 2019 to 176,049 thousand in 2020, it rebounded to 269,980 thousand in 2021 and then surged to a peak of 446,362 thousand in 2022 before slightly decreasing to 405,645 thousand in 2023. The adjusted net income followed a very similar pattern, with values closely mirroring the reported figures across all years, indicating consistent adjustments to net income that do not materially alter the overall trend.

Equity Position

The reported total equity showed a declining trend from 512,137 thousand in 2019 to 485,184 thousand in 2020, followed by a steady increase through 2023, culminating at 1,043,196 thousand. Adjusted total equity values were consistently higher than reported equity, with a similar pattern: declining slightly in 2020, then increasing each subsequent year, reaching 1,085,561 thousand in 2023. This indicates ongoing growth in the company's equity base, particularly after 2020, with adjustment factors positively impacting the equity measurement.

Return on Equity (ROE)

Both reported and adjusted ROE percentages show a general decline from the peak levels observed in 2019. Reported ROE dropped from 62.23% in 2019 to 36.28% in 2020, then gradually increased to 57.75% in 2022 before declining again to 38.88% in 2023. Adjusted ROE followed a comparable path, with slightly lower values than reported ROE after 2019, moving from 62.35% in 2019 down to 33.15% in 2020, rising to 54.99% in 2022, and declining to 37.5% in 2023. This pattern suggests fluctuations in profitability relative to equity, with peak efficiencies early in the period, some recovery mid-period, and a recent downward adjustment.

Overall Insights

The data reveal a company experiencing some volatility in earnings and profitability measures, particularly with a steep decrease in 2020, likely reflecting broader economic impacts. The recovery phase starting in 2021 is evident across net income and ROE, with 2022 showing the strongest performance. Equity figures reflect growth and strengthening of the financial foundation following the dip in 2020, with adjusted figures consistently higher, suggesting that deferred tax impacts and other income tax adjustments increase shareholder equity marginally. The decline in ROE in the last year, despite growth in net income and equity, indicates that the increase in equity outpaced net income growth, reducing the return generated on equity.

Trend in reported net income

The reported net income exhibited a decline from 318,728 thousand US dollars in 2019 to 176,049 thousand US dollars in 2020. Subsequently, it experienced a recovery, increasing to 269,980 thousand US dollars in 2021, followed by a significant rise to 446,362 thousand US dollars in 2022. However, in 2023, there was a decrease to 405,645 thousand US dollars.

Trend in adjusted net income

The adjusted net income similarly decreased from 344,763 thousand US dollars in 2019 to 173,660 thousand US dollars in 2020. It then increased to 269,752 thousand US dollars in 2021 and peaked at 447,625 thousand US dollars in 2022. A slight decline to 407,044 thousand US dollars occurred in 2023. Overall, the adjusted net income closely follows the pattern observed in the reported net income, with marginal differences in exact values.

Analysis of reported ROA

The reported return on assets (ROA) saw a marked decrease from 53.28% in 2019 to 30.8% in 2020, mirroring the net income decline of the same period. It then gradually increased to 35.33% in 2021 and sharply rose to 50.87% in 2022. In 2023, the ROA declined again to 35.08%, showing a fluctuating but generally high return on assets.

Analysis of adjusted ROA

The adjusted ROA shows a trend very similar to the reported ROA, declining from 57.64% in 2019 to 30.38% in 2020, then increasing to 35.3% in 2021 and peaking at 51.02% in 2022 before decreasing to 35.2% in 2023. This indicates that the adjustment for deferred income tax has a modest impact on the ROA percentage, maintaining the same general trend over the years.

Summary of insights

Both reported and adjusted financial data reveal a significant decline in income and return on assets in 2020, followed by a steady recovery through 2021 and a peak in 2022. The slight declines in 2023 in both income and ROA values suggest a potential softening in performance after the peak year. The close alignment between reported and adjusted figures indicates that the deferred income tax adjustments do not substantially alter the overall financial trend and performance assessment.