Western Digital Corp. (NASDAQ:WDC)

Current Income Tax Expense Trend

The current income tax expense demonstrates significant volatility over the analyzed periods. It started at a high level of 1,758 million USD in 2018, then sharply declined to 93 million USD in 2019. Subsequently, it increased gradually to 286 million USD in 2020, 348 million USD in 2021, and peaked again at 509 million USD in 2022 before dropping to 180 million USD in 2023. This pattern indicates fluctuating taxable income or changes in tax regulations impacting the current tax liability.

Deferred Income Tax Expense Trend

The deferred income tax expense exhibits an alternating pattern between positive and negative values, suggesting variations in timing differences and future tax consequences. It began with a negative value of -348 million USD in 2018, shifted to a positive 374 million USD in 2019, then reverted to negative figures in 2020 (-82 million USD) and 2021 (-242 million USD). In 2022, it turned positive again at 114 million USD, followed by another negative value of -34 million USD in 2023. This inconsistency might be attributed to changes in deferred tax assets and liabilities or adjustments to tax rates and policies.

Total Income Tax Expense Trend

The overall income tax expense, which is the sum of current and deferred components, reflects the net effect of these fluctuations. Starting at 1,410 million USD in 2018, it decreased to 467 million USD in 2019, halved to 204 million USD in 2020, and further declined to 106 million USD in 2021. In 2022, there was a notable increase to 623 million USD, but it fell significantly again to 146 million USD in 2023. This trend indicates episodic tax burdens with possible influences from operational performance, temporary tax differences, or episodic tax events.

Insights

The data reveals that current tax expense constitutes the larger and more volatile portion of the tax expense compared to deferred tax. The intermittent positive and negative movements in deferred tax expenses point to fluctuating timing differences or tax adjustments. Overall, the combined income tax expense exhibits variability that may reflect changes in earnings before tax, tax planning strategies, or external tax environment alterations. Careful attention to the constituent components is essential for a comprehensive understanding of the tax position over time.

U.S. Federal Statutory Tax Rate

The statutory tax rate remains stable at 21% from 2019 through 2023, following a reduction from 28% in 2018.

Tax Rate Differential on International Income

This metric shows significant fluctuations over the years, ranging from a low of -443% in 2020 to positive 8% in 2021, and later declining again to -33% in 2023. The large negative spike in 2020 suggests unusual or one-off adjustments in international income taxation.

Tax Effect of U.S. Foreign Income Inclusion

The tax effect shows notable volatility with sharp negative impacts in 2019 and 2020 (-7% and -38% respectively), a slight positive effect in 2021 (5%), and minor negative adjustments in 2023 (-1%). Data for 2022 is missing.

Tax Effect of U.S. Foreign Minimum Tax

Recorded only in 2019 and 2020 with substantial negative impacts (-38% and -235%), followed by small positive values in 2021 (1%) and 2022 (5%), but absent in other years.

Tax Effect of U.S. Foreign Derived Intangible Income

Initially positive in 2019 (11%) and markedly high in 2020 (109%), this effect reverses to negative in 2021 (-14%) and 2022 (-1%), ending with a modest positive in 2023 (4%). This variation could indicate shifts in tax strategy or changes in intangible income recognition.

Tax Effect of U.S. Non-deductible Stock-based Compensation

This effect remains modest but predominantly negative across most years, with values ranging from -1% to -21%, except for minor positive rates in 2021 and 2022 (both 1%).

Tax Effect of U.S. Permanent Differences

Negative effects are noted in earlier years, especially 2020 (-26%), with smaller negative or zero values in other periods. No data is observed post-2021.

IRS Tentative Settlement

Positive impacts appear only in the last two periods (2022 and 2023) at 15% and 1%, respectively, suggesting recent one-time tax settlements influencing rates.

One-time Mandatory Deemed Repatriation Tax

This item only appears in 2018 and 2019, with significant positive and negative impacts (75% and -41%), indicating a major one-off tax event affecting these years.

Re-measurement of Deferred Taxes

Minor fluctuations manifest in 2018 and 2019 with -3% and 2%, followed by absence in later years.

Impact of 2017 Act

Prominently affects 2018 and 2019 with large positive and negative values (72% and -39%), with no reported impact afterward.

Change in Valuation Allowance

A downward trend from 5% in 2018 to negative values in subsequent years (-2% to -12%), then stabilizing with small positive changes (1%) in the final two years, indicating adjustments in deferred tax assets valuation.

Unremitted Earnings of Certain Non-U.S. Entities

Significant negative impacts occur in 2019 and 2020 (-79% and -114%), followed by minor positive or negligible adjustments from 2021 to 2023.

Foreign Income Tax Credits

Strong positive influence in 2019 and 2020 (23% and 191%), sharply reversing to minor negative effects from 2021 onward, implying variability in foreign tax credit utilization.

R&D Tax Credits

Substantial positive effect in 2020 (147%), contrasted by negative impacts in surrounding years, indicating a notable spike in research and development tax credit claims during 2020.

U.S. Return to Provision

The tax impact is minor and sporadic, with only two negative entries (-3% in 2021 and -2% in 2023), suggesting smaller reconciliations between returns and provisions.

Other

This category displays small and inconsistent fluctuations across periods, ranging from -22% to 5%, reflecting miscellaneous tax effects.

Effective Tax Rate

The effective tax rate exhibits extreme volatility, featuring a drastic drop to -443% in 2020, a recovery to positive territory in 2021 (11%) and 2022 (29%), and a return to negative (-9%) in 2023. These fluctuations suggest significant tax adjustments, one-time items, or non-recurring tax benefits/losses influencing overall tax expense.

The financial data reveals several noteworthy trends over the corresponding periods.

Sales related reserves and accrued expenses not currently deductible

This item showed fluctuations, starting at 53 million USD in 2018, decreasing slightly in 2019, then increasing to 88 million USD in 2021 before declining again to 52 million USD in 2023. This suggests variability in the reserves and accrued expenses over the years without a clear directional trend.

Accrued compensation and benefits not currently deductible

A gradual decline is observed, beginning at 145 million USD in 2018 and decreasing steadily to 88 million USD by 2023, indicating a consistent reduction in accrued compensation and benefits liabilities.

Deferred revenue

Data is only available for 2021 at 128 million USD, with no other periods reported, making trend analysis unfeasible.

Net operating loss carryforward

There is a consistent decrease from 443 million USD in 2018 down to 183 million USD in 2023. This declining trend may indicate the utilization or expiration of net operating loss carryforwards over time.

Business credit carryforward

This item shows a generally increasing pattern, moving from 448 million USD in 2018 to a peak of 483 million USD in 2022, followed by a slight decrease to 478 million USD in 2023, suggesting accumulation or less utilization of business tax credits.

Long-lived assets (reported separately for assets and liabilities)

The reported asset values for long-lived assets have steadily declined from 161 million USD in 2018 to 56 million USD in 2023. Corresponding liabilities associated with long-lived assets declined from -491 million USD in 2018 to -48 million USD in 2023. Both decreases illustrate a reduction in the carrying amounts of these assets and related deferred tax liabilities, potentially reflecting disposals, impairments, or amortization.

Other (assets and liabilities)

On the asset side, the "Other" category increased from 118 million USD in 2018 to a peak of 178 million USD in 2022 before slightly decreasing to 171 million USD in 2023, showing some variability but generally increasing. For liabilities, the "Other" category decreased steadily in absolute value from -43 million USD in 2018 to -7 million USD in 2023, indicating a reduction in associated liabilities.

Deferred tax assets

Deferred tax assets decreased from 1,368 million USD in 2018 to 1,028 million USD in 2023, indicating a decline in the recognition of deferred tax benefits over the timeframe.

Valuation allowances

The valuation allowances have remained relatively stable, fluctuating slightly around -600 million USD, reaching -565 million USD in 2023. This suggests consistent conservatism in recognizing deferred tax assets.

Deferred tax assets, less valuation allowances

This net figure showed a decline from 754 million USD in 2018 to 463 million USD in 2023, indicating a decreasing net deferred tax asset position after accounting for valuation allowances.

Unremitted earnings of certain non-U.S. entities

This liability increased in absolute value from -5 million USD in 2018 to -297 million USD in 2023, pointing to growing deferred tax liabilities or unrecognized tax obligations related to international operations.

Deferred tax liabilities

Deferred tax liabilities decreased significantly in absolute value from -539 million USD in 2018 to -352 million USD in 2023, suggesting reduced future tax obligations recognized on the balance sheet.

Deferred tax assets (liabilities), net

This net figure shows notable volatility, starting positive at 215 million USD in 2018, transitioning to negative territory in 2019 and 2020 (-138 million and -45 million USD respectively), then turning positive again with 188 million USD in 2021 and settling around 100-111 million USD in 2022 and 2023. This pattern reflects fluctuations in the net deferred tax position, possibly linked to changes in tax regulations, earnings, or asset composition.

In summary, the data exhibits a general decline in net operating loss carryforwards and deferred tax assets while business credit carryforwards have increased. Long-lived assets and associated liabilities have decreased notably, suggesting asset reduction or write-downs. The net deferred tax position has fluctuated over the years but remains positive in the most recent periods. Changes in accrued compensation and other liabilities indicate efforts to reduce certain accrued expenses. Overall, the tax-related deferred items and asset base display considerable changes that may impact tax planning and asset management strategies.

The analysis reveals several notable trends in the financial position and performance over the period from mid-2018 to mid-2023.

Total Assets

Total assets, both reported and adjusted, show a gradual decline over the six-year span. Reported total assets decreased from approximately $29.2 billion in 2018 to $24.4 billion in 2023. Adjusted total assets follow a similar path, declining slightly more in later years, reaching roughly $24.3 billion in 2023. This trend suggests a contraction in the asset base.

Total Liabilities

Total liabilities exhibit a consistent downward trajectory. Reported liabilities fell significantly from about $17.7 billion in 2018 to $12.7 billion in 2023. Adjusted liabilities mirror this pattern closely, declining from $17.7 billion to $12.7 billion over the same period. The reduction in liabilities indicates de-leveraging and an improved debt position.

Shareholders’ Equity

Shareholders' equity presents a more variable trend. Reported equity decreased sharply from $11.5 billion in 2018 to a low near $9.6 billion in 2020, then increased markedly to $12.2 billion in 2022, before slightly declining to $11.7 billion in 2023. Adjusted equity follows a similar fluctuating pattern but with consistently slightly lower values. Overall, equity recovered after initial declines but ended the period marginally below the peak reached in 2022.

Net Income (Loss)

Net income demonstrates considerable volatility across the years. Reported net income began at $675 million in 2018, plunged into losses of $754 million in 2019 and $250 million in 2020, rebounded strongly to $821 million in 2021 and peaked at $1.5 billion in 2022, but then dropped dramatically to a loss of $1.7 billion in 2023. Adjusted net income reflects a similar trend, but with generally lower amounts in positive years and deeper losses in negative years. This pattern indicates fluctuating profitability, with a significant downturn in the most recent year.

Summary:

Over the reviewed period, total assets and liabilities decreased steadily, illustrating a contraction in the company's size and leverage. Shareholders’ equity experienced fluctuations but showed resilience by recovering after initial declines. However, profitability was volatile, with substantial swings from profit to loss, particularly marked by a severe loss in the fiscal year ending in 2023. This may raise concerns about earnings stability and suggests the need for further investigation into factors driving recent negative income performance. The adjusted figures generally parallel reported values but consistently present a somewhat more conservative financial profile.

Net Profit Margin

The reported net profit margin exhibits significant volatility over the analyzed periods, starting at 3.27% in 2018, turning negative for three consecutive years with the lowest at -4.55% in 2019, before briefly recovering to a peak of 7.98% in 2022, followed by a sharp decline to -13.85% in 2023. The adjusted net profit margin follows a similar pattern but consistently remains lower than the reported figures in each period, indicating the impact of tax and nonrecurring adjustments. The adjusted margin also shows an abrupt decline in 2023 to -14.13%, reinforcing concerns about profitability in the most recent year.

Total Asset Turnover

Both reported and adjusted total asset turnover ratios show relative stability over the six-year span, fluctuating narrowly around 0.63 to 0.72 until 2022. Notably, there is a decline in 2023 to approximately 0.5, suggesting a decrease in the efficiency of asset utilization to generate revenues in the latest period. The closeness of reported and adjusted ratios indicates minimal influence of tax adjustments or anomalies on asset turnover.

Financial Leverage

The company’s financial leverage ratios display a gradual downward trend, moving from approximately 2.54-2.56 in 2018 to around 2.08-2.09 in 2023. This steady decline points to a reduction in reliance on debt financing over the years, which may signal efforts to strengthen the capital structure or manage financial risk. There is a minimal difference between reported and adjusted leverage, suggesting tax adjustments have limited effect on this metric.

Return on Equity (ROE)

Reported ROE shows considerable fluctuations, with negative returns recorded in 2019 and 2020, peaking at 12.27% in 2022 before dropping sharply to -14.55% in 2023. The adjusted ROE follows the same trajectory but maintains lower values throughout, indicating the impact of tax and deferred adjustments on equity returns. The substantial swing from positive to negative in the final year signals increased volatility and potential operational or market challenges adversely affecting shareholder returns.

Return on Assets (ROA)

Similarly, both reported and adjusted ROA exhibit swings between positive and negative values, with the reported figures starting at 2.31% in 2018, dipping into negative territory in 2019 and 2020, then recovering somewhat until 2022 before sharply falling to -6.98% in 2023. Adjusted ROA shows a similar pattern but with consistently lower percentages, highlighting the diminishing asset profitability when adjustments are considered. The negative drop in 2023 suggests weakened operational performance and asset efficiency in the latest reporting period.

The financial data reflects significant volatility in the reported and adjusted net income and net profit margins over the periods analyzed.

Net Income (Loss) Trends

Reported net income shows marked fluctuations, beginning with a positive value of $675 million in June 2018, then sharply declining to a loss of $754 million in June 2019. This was followed by a smaller loss in July 2020 of $250 million, a rebound to a profit of $821 million in July 2021, an increase to $1500 million in July 2022, and finally a substantial loss of $1706 million in June 2023.

The adjusted net income follows a similar pattern, though with consistently lower magnitudes. It starts at $327 million in June 2018, decreases to a loss of $380 million in June 2019, dips further to a loss of $332 million in July 2020, improves to $579 million in July 2021, increases significantly to $1614 million in July 2022, and then records a loss of $1740 million in June 2023.

Net Profit Margin Trends

Reported net profit margins mirror the income patterns, showing a modest positive margin of 3.27% in June 2018, a sharp negative margin of -4.55% in June 2019, and a less negative margin of -1.49% in July 2020. The margin turns positive again, to 4.85% in July 2021 and grows to 7.98% in July 2022. However, it declines dramatically to -13.85% in June 2023, indicating significant profitability challenges in the latest period.

Adjusted net profit margins similarly fluctuate but register slightly different values. They begin at 1.58% in June 2018, decrease to -2.29% in June 2019, further decline to -1.98% in July 2020, then improve to 3.42% in July 2021 and peak at 8.59% in July 2022 before falling steeply to -14.13% in June 2023.

Insight Summary

The data reveals a pattern of significant earnings volatility over the six-year period, characterized by swings between profit and loss. Both reported and adjusted figures show improvement in the periods leading up to July 2022, followed by sharp declines in June 2023. The negative adjusted figures in recent years suggest that adjustments for deferred taxes and other factors have had a meaningful impact on the company's reported financial performance. The sharp downturn in the latest period signals potential underlying operational or market challenges that warrant further investigation.

Total Assets

The reported total assets exhibit a declining trend over the examined six-year period, decreasing from US$29,235 million in 2018 to US$24,429 million in 2023. This marks an overall reduction of approximately 16.5%. Adjusted total assets follow a very similar trajectory, beginning at US$29,020 million in 2018 and tapering down to US$24,318 million in 2023, reflecting a consistent decrease in asset base across both reported and adjusted measures.

Total Asset Turnover

The reported total asset turnover ratio shows fluctuation during the period under review. It starts at 0.71 in 2018, decreases to a low of 0.63 in 2019, then stabilizes around 0.65 in 2020 and 2021 before increasing to 0.72 in 2022. The 2023 figure shows a notable drop to 0.50, representing the lowest turnover ratio in the observed time frame. The adjusted total asset turnover closely mirrors the reported ratio, with very minor differences in the 2023 figure (0.51 vs. 0.50), suggesting consistent operational efficiency assessments whether considering reported or adjusted figures.

Patterns and Insights

Over the analyzed timeline, there is clear evidence of a contracting asset base accompanied by fluctuating asset utilization efficiency. The decline in total assets might suggest asset disposals, write-downs, or operational downsizing efforts. Despite asset reduction, total asset turnover generally remains stable or improves marginally until 2022, indicating effective usage of assets to generate revenue. However, the sharp decline in turnover in 2023 signals a potential reduction in asset efficiency or revenue generation capacity, which could warrant further investigation into underlying operational or market factors affecting performance in the most recent period.

Asset Trends

The total assets, both reported and adjusted, have shown a general declining trend from 2018 through 2023. Reported total assets decreased from $29,235 million in 2018 to $24,429 million in 2023. Adjusted total assets mirrored this pattern, falling from $29,020 million to $24,318 million over the same period. The decline was gradual, with the most noticeable drop occurring between 2022 and 2023.

Shareholders’ Equity

Shareholders’ equity, reported and adjusted, exhibited a fluctuating but overall declining trend from 2018 to 2020, followed by a recovery phase. Reported equity decreased from $11,531 million in 2018 to $9,551 million in 2020, then increased steadily to $11,721 million by 2023. Adjusted equity showed a similar pattern, decreasing initially from $11,316 million to $9,596 million and then rising to $11,612 million in 2023. This suggests a period of equity reduction followed by stabilization and moderate growth.

Financial Leverage

Financial leverage ratios, both reported and adjusted, increased slightly from 2018 to 2020, indicating a higher degree of debt relative to equity during that period. Specifically, reported leverage rose from 2.54 to 2.69 and adjusted leverage from 2.56 to 2.67. After 2020, the leverage ratios reversed course, declining continuously through 2023, with reported leverage reaching 2.08 and adjusted leverage reaching 2.09. This trend reflects a gradual de-leveraging process and potentially improved balance sheet strength.

Comparison of Reported versus Adjusted Figures

The adjusted figures closely track the reported figures, with only minor differences observable throughout all periods. Adjusted total assets and equity are marginally lower than the reported values, while financial leverage ratios are correspondingly similar. This indicates that the adjustments related to income tax and other factors have a limited but consistent effect on the financial metrics, preserving the overall trends and financial position portrayal.

Overall Insight

Over the six-year period, the data reveals a contraction in total assets alongside an initial reduction and subsequent recovery in shareholders’ equity. The company appears to have reduced its leverage following a peak in financial obligations around 2020. The consistent difference between reported and adjusted figures highlights the impact of tax adjustments but does not materially alter the financial position trends. The shift towards lower leverage and recovering equity suggests an emphasis on strengthening the capital structure in recent years.

The financial data reveals several notable trends in net income, shareholders’ equity, and return on equity (ROE) over the six-year span analyzed.

Net Income (Loss)

Reported net income exhibits significant volatility, starting with a positive result of 675 million USD in 2018, followed by consecutive losses in 2019 (-754 million USD) and 2020 (-250 million USD). This was succeeded by a recovery and growth phase, with income rising to 821 million USD in 2021 and further to 1,500 million USD in 2022, before a sharp reversal to a loss of 1,706 million USD in 2023. Adjusted net income follows a similar pattern but with generally smaller absolute values in losses and gains. The adjustment reduces income volatility somewhat but still reflects substantial fluctuations and a final negative figure in 2023 (-1,740 million USD), indicating continued operational or extraordinary challenges.

Shareholders’ Equity

Reported shareholders’ equity shows a declining trend from 11,531 million USD in 2018 to 9,551 million USD in 2020, before recovering to 12,221 million USD in 2022 and then slipping slightly to 11,723 million USD in 2023. Adjusted shareholders’ equity presents a similar trajectory but generally remains slightly lower than reported equity, indicating that adjustments mostly reduce equity values marginally. This pattern suggests a period of asset erosion or shareholder value reduction followed by stabilization and modest recovery.

Return on Equity (ROE)

Reported ROE mirrors the net income volatility, starting positively at 5.85% in 2018, turning negative in 2019 (-7.56%) and 2020 (-2.62%), then recovering to 7.66% and peaking at 12.27% in 2022 before dropping sharply to -14.55% in 2023. Adjusted ROE follows the same trend but remains consistently lower, underscoring the impact of adjustments on the company’s profitability measurements. The large swings in ROE indicate highly variable profitability relative to shareholders’ investment, influenced by both operational performance and adjustments.

Overall, the data reflects considerable financial instability over the period, marked by alternating profitable and loss-making years. The adjustments to income and equity slightly moderate the extremes but do not fundamentally alter the trend of volatility. The peak profitability in 2022 contrasts with significant losses and declines in both prior and subsequent years, suggesting episodic factors influencing the financial results. The decline in shareholders’ equity through 2020, followed by recovery and then a slight decrease again, further emphasizes a challenging economic environment or internal company dynamics affecting long-term value.

The analysis of the financial data over the six-year period reveals noticeable fluctuations in income, asset values, and profitability metrics.

Net Income (Loss)

Reported net income exhibits significant volatility, with a positive result of $675 million in 2018 followed by substantial losses in 2019 (-$754 million) and 2020 (-$250 million). Recovery is seen in 2021 ($821 million) and acceleration in 2022 ($1,500 million), before declining sharply into a large loss of -$1,706 million in 2023. Adjusted net income shows a similar pattern, though the losses in 2019 and 2020 are somewhat less severe, and the gains in 2022 are slightly higher at $1,614 million. The adjusted net income in 2023 also reflects a substantial loss of -$1,740 million.

Total Assets

The reported total assets display a modest declining trend from $29,235 million in 2018 to $24,429 million in 2023, indicating a gradual decrease in the asset base over time. Adjusted total assets closely follow the reported figures with minimal discrepancies, showing a similar contraction from $29,020 million to $24,318 million during the same period.

Return on Assets (ROA)

Reported ROA mirrors the fluctuations found in net income, starting positively at 2.31% in 2018, turning negative in 2019 (-2.86%) and 2020 (-0.97%), then improving markedly in 2021 (3.14%) and peaking at 5.71% in 2022. However, it sharply declines to -6.98% in 2023. Adjusted ROA follows a similar trend with generally lower positive returns and more moderate negative returns, ranging from 1.13% in 2018 down to -7.16% in 2023, indicating profitability challenges particularly in the final year.

Overall, the financial data suggests a period of instability in profitability despite relatively stable asset levels. The company experienced significant income losses in multiple years, partially offset by strong recoveries in 2021 and 2022, but encountered a severe setback in 2023. The downward trend in assets may reflect divestitures or asset impairments. The ROA metrics indicate that returns on assets fluctuated correspondingly with income performance, pointing to challenges in consistently generating profits from available assets.