Abiomed Inc. (NASDAQ:ABMD)

Inventory Turnover

The inventory turnover ratio generally declined from 2.02 in June 2016 to a low near 1.55 in September 2018, indicating a slowing rate of inventory turnover during this period. Subsequently, it showed a moderate recovery and stabilized around 2.00 by mid-2021 before slightly decreasing again towards the end of the period, ending at 1.96 in September 2022.

Receivables Turnover

Receivables turnover exhibited an overall upward trend from 8.24 in June 2016 to approximately 11.37 by September 2022. This suggests improved efficiency in collecting receivables over time, with minor fluctuations but a clear strengthening in turnover rate throughout the observed periods.

Payables Turnover

The payables turnover ratio showed notable volatility. Starting at 3.43 in June 2016, it peaked above 7.00 around September 2020 and fluctuated thereafter to end near 5.72 in September 2022. This indicates variability in the rate of payments to suppliers, with periods of faster turnover interspersed with slower payment patterns.

Working Capital Turnover

Working capital turnover generally decreased over the timeframe, beginning around 1.73 in June 2016 and trending down to approximately 1.16 by September 2022. This gradual decline suggests a reduction in efficiency regarding the use of working capital to generate revenues.

Average Inventory Processing Period

The average days inventory held lengthened from 181 days in June 2016 to a peak of 236 days in September 2018, reflecting slower movement of inventory. After this peak, the period decreased gradually and somewhat stabilized near 178-186 days towards the end of the data period, indicating some improvement in inventory management speed.

Average Receivable Collection Period

The receivable collection period generally declined from 44 days in mid-2016 to about 31-32 days by late 2021 and 2022, showcasing enhanced efficiency in collecting payments from customers over the years.

Operating Cycle

The operating cycle extended from approximately 225 days in June 2016 to a high of around 276 days in September 2018, reflecting slower overall cash flow conversion. Subsequent reductions brought the cycle down to about 209-218 days in the most recent periods, indicating a shortening of the time needed to convert inventory and receivables into cash.

Average Payables Payment Period

This period showed fluctuations, decreasing sharply from 107 days in June 2016 to around 51 days by September 2020, implying faster payments to suppliers. This was followed by an increase to about 69 days towards the last quarter of 2022, suggesting a lengthening in payables period within the later stages.

Cash Conversion Cycle

The cash conversion cycle displayed a relatively steady pattern but with a general increase from 118 days in mid-2016 to peaks near 195 days in September 2018, indicating a lengthening cash conversion period. It later declined to approximately 144-154 days in 2021-2022, reflecting some improvement in the company's cash flow efficiency.

Cost of Revenue

The cost of revenue demonstrates a general upward trend over the analyzed periods. Starting from approximately $15.1 million in the second quarter of 2016, it rises with some fluctuations to reach a peak near $52.6 million in the third quarter of 2022. Periods of notable increase appear especially from 2017 onwards, with several quarters showing single-period growth, although there are occasional declines, such as in the third quarter of 2020 and the last quarter of 2022. Overall, the cost of revenue reflects a consistent expansion, indicative of increased production or sales activities.

Inventories, Net

Inventories show a steady increase throughout the period under review. From approximately $29.1 million at mid-2016, inventory levels climb consistently each quarter, reaching over $102 million by the third quarter of 2022. This increase suggests a buildup in stock, which may be aligned with anticipated demand growth or longer production cycles. There are no visible periods of significant inventory reduction, highlighting a consistent accumulation over time.

Inventory Turnover

Inventory turnover ratios are available from the first quarter of 2017 onward. The ratio initially registers around 2.02 and fluctuates slightly but mostly exhibits a mild downward trend until mid-2019, when it reaches a low near 1.55. Subsequently, the turnover ratio improves gradually, achieving approximately 2.05 by late 2021. Toward the end of the observed period, it shows minor variability around the 2.0 mark. This pattern indicates that inventory was turning over more slowly during the 2017-2019 period but that efficiency or sales velocity improved thereafter.

Overall Insights

The upward trends in both cost of revenue and inventory levels suggest an overall growth phase, potentially reflecting expanding operations or market demand. The inventory turnover ratio’s decline and later recovery indicates an initial period where inventory management may have been less efficient or stock levels were elevated beyond immediate sales requirements, followed by improved inventory usage efficiency. These patterns could signal strategic adjustments in supply chain or sales processes aimed at optimizing asset utilization.

Revenue Trend

The revenue demonstrates an overall upward trajectory from June 30, 2016, through June 30, 2022. Initial values start around $103 million and progressively increase to approximately $266 million by mid-2022. Notable increments are observed in some quarters, such as from December 31, 2016, to March 31, 2018, and more recently from December 31, 2020, to June 30, 2022. However, some fluctuations occur, including a dip around June 30, 2020, where revenue decreased substantially compared to the previous quarter, likely indicating an exceptional event impacting sales during that period.

Accounts Receivable, Net Trends

The net accounts receivable values show a general growth trend from mid-2016 to late 2019, rising from about $41 million to nearly $101 million. Thereafter, a decline is seen during 2020, where values drop to figures in the $82 million to $81 million range, before stabilizing and slightly increasing again toward the end of 2022. The decrease during 2020 coincides with the reduction in revenue observed during the same period.

Receivables Turnover Ratio

The receivables turnover ratio, available from December 31, 2016, onwards, indicates a fluctuating yet overall improving efficiency in receivables collection. Starting at around 8.24 times turnover, it oscillates with some quarters dipping to 8.33 and others rising up to over 11 times turnover by late 2021 and mid-2022. The increase in this ratio suggests enhanced collection effectiveness and potentially shorter credit periods granted to customers over time.

Interrelationship Between Revenue, Accounts Receivable, and Receivables Turnover

The data portrays periods where revenue increases without a commensurate rise in accounts receivable, reflected in a higher receivables turnover ratio. This dynamic suggests improved cash collection practices or altered sales terms favoring quicker payments. Conversely, during 2020, when revenue dipped, accounts receivable also decreased but less proportionally, slightly affecting the turnover ratio. Overall, the company appears to have achieved enhanced efficiency in converting sales to cash, especially notable from 2020 onwards despite the revenue fluctuation during that time.

Summary

The financial metrics indicate a generally positive growth path over the considered period with some interruptions likely due to external factors. The company has succeeded in maintaining or improving its receivables management despite some volatility in revenue. The increasing receivables turnover toward the later periods reflects better operational efficiency in managing credit risk and cash flow cycles, which is crucial for sustaining growth and financial stability.

The financial data over the analyzed periods exhibits various trends in cost of revenue, accounts payable, and payables turnover ratios. The cost of revenue demonstrates a general upward trajectory from mid-2016 to mid-2022, despite fluctuations in certain quarters. Starting at approximately 15,070 thousand US dollars in June 2016, it consistently increased, reaching around 51,626 thousand US dollars by September 2022. There are notable spikes during some quarters such as March 2018 and December 2019, suggesting periods of intensified production or sales activities.

Accounts payable figures reveal significant variability across the quarters. Initially, accounts payable increased rapidly from about 8,372 thousand US dollars in June 2016 to approximately 23,565 thousand US dollars by March 2018. Following this high, there are alternating increases and decreases, with a marked decline after June 2020, falling back to around 21,734 thousand US dollars by September 2020. Subsequently, accounts payable rose again, peaking at about 35,346 thousand US dollars in March 2022 before stabilizing near 35,070 thousand US dollars in the later period. This pattern suggests cyclical adjustments in short-term liabilities in response to operational or procurement changes.

The payables turnover ratio—available from March 2017 onward—shows considerable fluctuation, ranging approximately between 3.43 and 7.09. Higher turnover ratios were observed particularly from late 2019 through 2021, indicating increased efficiency or faster payment of suppliers in those periods. The peak ratio in September 2020 at about 7.09 implies strong payables management, while lower ratios around March 2017 and some other quarters suggest relatively slower payments or potentially higher accounts payable balances relative to cost of goods sold.

Overall, the trends disclose steady growth in costs aligned with increased operational scale, while accounts payable and turnover ratios manifest variability that likely correlates with changes in payment terms, supplier relationships, or operational demands. The interplay between rising costs and fluctuating payables efficiency reflects active management of working capital amidst expanding business activities.

Working Capital

Working capital shows a generally increasing trend over the analyzed period. Starting at approximately $257 million in June 2016, it increases steadily with periodic fluctuations, reaching its peak of around $929 million in September 2022. Significant upward movements are observed around early 2018, mid-2020, and from late 2021 onwards, indicating a strengthening liquidity position over time.

Revenue

Revenue demonstrates a positive growth pattern with some volatility. Beginning at about $103 million in June 2016, revenue progressively rises to a high point of roughly $277 million by June 2022, followed by a slight dip in the last recorded quarter to approximately $266 million. Notable increases occur towards the end of 2016, throughout 2017 and 2021, reflecting periods of increased sales or business expansion.

Working Capital Turnover

The working capital turnover ratio, available from March 2017 onward, reveals a decreasing trend. Starting at 1.73, the ratio gradually declines to approximately 1.16 by September 2022. This decrease suggests that despite growing working capital, revenue is not increasing proportionally, indicating a potential reduction in the efficiency with which working capital is used to generate revenue.

Overall Insights

The data reflects a company that is increasing its working capital and revenue concurrently, though the working capital is growing at a pace that slightly outstrips revenue growth. The decline in working capital turnover ratio points to the need for careful monitoring of operational efficiency. Sustained increases in working capital may signal higher investments in current assets or changes in operational needs. Meanwhile, the rise in revenue suggests successful sales growth, though the company should aim to improve the utilization of its working capital to bolster turnover efficiency.

The inventory turnover ratio shows fluctuations over the analyzed periods, starting from a recorded value of 2.02 on June 30, 2016, moving through a range with a low around 1.55 in September 2019, and then generally increasing again to values near 2 in mid-2022. This indicates varying efficiency in managing inventory, with a notable decline during the 2017–2019 interval followed by a recovery in 2020 and 2021.

Correspondingly, the average inventory processing period demonstrates an inverse pattern relative to the inventory turnover ratio. Beginning from 181 days in June 2016, it extends progressively to a peak of approximately 236 days in September 2019, suggesting slower inventory turnover during that time frame. Subsequently, this period decreases, trending back down to the 178–186 days range by late 2022, which aligns with the improvement in inventory turnover observed.

Inventory Turnover Ratio

Initially recorded at 2.02, the ratio decreased to a trough of about 1.55 in late 2019, signaling reduced efficiency in converting inventory to sales. Post-2019, the ratio rose steadily, indicating improved inventory management and potentially more effective sales or production cycles.

Average Inventory Processing Period

Demonstrates an increasing trend through 2017 to 2019, reaching around 236 days, implying inventory remained longer before sale or usage. This period shortens beginning in 2020, reflecting faster inventory movement and better operational efficiency in recent periods.

The inverse relationship between these two metrics is consistent with expectations, whereby a higher inventory turnover ratio corresponds to a shorter processing period. The observed trends suggest a phase of inventory management challenges prior to 2020, followed by a recovery and optimization phase, potentially due to operational improvements or shifts in market demand.

Receivables Turnover Ratio

The receivables turnover ratio values are available starting from the period ending June 30, 2016. Initially, the ratio fluctuates moderately between about 8.24 and 9.93 from mid-2016 through the end of 2019, indicating some variability in the efficiency of collecting receivables during this period. Beginning in early 2020, a noticeable upward trend is observed, with the ratio rising from approximately 9.72 in March 2020 to a peak of 11.59 by mid-2022. This upward movement suggests an improvement in the frequency of receivables collection, implying enhanced operational efficiency and potentially stronger cash flow management over recent years.

Average Receivable Collection Period

The average receivable collection period exhibits an inverse trend relative to the receivables turnover ratio, as expected. Starting around 44 days in mid-2016, the period exhibits a gradual decline over the years, moving from the low 40s down to approximately 31-32 days by mid-2022. This reduction indicates a shorter duration of days outstanding for receivables, reflecting an improvement in the company's ability to collect payments more rapidly. The decline is gradual but consistent, confirming increased efficiency in managing customer credit terms and collections.

Overall Analysis

The combination of a rising receivables turnover ratio and a decreasing average collection period underscores a positive development in the working capital management related to accounts receivable. The data illustrates that over time, from 2016 through 2022, the company has progressively enhanced its receivables collection process, which could benefit liquidity and reduce the risk associated with credit extended to customers. No significant disruptions or deteriorations are evident; rather, the trend reflects continual operational improvements.

Average Inventory Processing Period

The average inventory processing period shows an overall increasing trend from mid-2016 to mid-2019, rising from 181 days to a peak of 236 days. After this peak, the period begins to decline gradually, reaching below 180 days by late 2021. However, this period experiences slight fluctuations around 180 days from late 2021 through late 2022. This suggests that the inventory turnover became slower initially but improved moderately after 2019, indicating enhanced inventory management or changes in operational dynamics.

Average Receivable Collection Period

The average receivable collection period exhibits minor fluctuations around a relatively stable range. Starting around 44 days in mid-2016, it declines slightly to approximately 38 days by late 2018, then varies within 31 to 44 days through late 2022. Notably, there is a modest downward trend from late 2021 to late 2022, with collection days reducing to about 31-32 days. This pattern indicates consistent and potentially improving efficiency in receivable collections over the period.

Operating Cycle

The operating cycle, which combines inventory processing and receivable collection periods, mirrors the trends seen in the individual components. From mid-2016 through mid-2019, the operating cycle increases steadily from approximately 225 days to a peak above 275 days, reflecting a longer time to convert inventory and receivables into cash. Post-2019, the cycle decreases, falling below 215 days by late 2021, then stabilizing around 210 to 218 days through late 2022. This reduction suggests improvements in overall operational efficiency, leading to quicker cash conversion times in more recent periods.

Payables Turnover Ratio

The payables turnover ratio shows variability over the analyzed quarters, with an overall upward trend from 2017 onward. Initially, in the first available data point (March 31, 2017), the ratio stood at 3.43, increasing notably to a peak of 7.09 by June 30, 2020. This peak indicates a significant acceleration in payables turnover during this period. After this high, the ratio exhibits some fluctuations but generally remains elevated compared to earlier years, fluctuating mostly between 4.5 and 6.5. This pattern suggests improved efficiency in managing payables, possibly due to faster payments to creditors or changes in credit terms.

Average Payables Payment Period (Days)

The average number of days taken to pay payables demonstrates an inverse relationship to the payables turnover ratio. Starting from a high of 107 days on March 31, 2017, the payment period declines sharply to 60 days by June 30, 2017. This shorter period indicates quicker payment cycles. The metric experiences some fluctuations across subsequent quarters but remains lower compared to the initial value, ranging generally between 50 and 90 days. Notably, the shortest average payment periods occur around June to September 2020, coinciding with the peak in payables turnover ratio. There is a moderate increase in payment days after mid-2020 but levels off around 65 to 70 days toward the end of the data period.

Insights and Interpretation

The inverse correlation between the payables turnover ratio and the average payment period underscores a trend toward expedited payment practices by the company over the studied timeline, particularly in the years 2019 and 2020. The peak activity in mid-2020 suggests a strategic shift to accelerate settlements with suppliers or creditors, possibly to strengthen supplier relationships or reflect changes in working capital management. Post-2020 data signals a normalization or stabilization after this period of rapid turnover, with payment periods increasing slightly but still faster than in early periods. Overall, the data suggests enhanced payables management efficiency in recent years compared to the earlier part of the time series.

The analysis of the quarterly financial data reveals distinct patterns in inventory management, receivables, payables, and overall cash conversion efficiency.

Average Inventory Processing Period

The average inventory processing period exhibited an upward trend starting from 181 days in June 2016 and reaching a peak of 236 days by September 2019. Subsequently, a gradual decline occurred, bringing the period down to 178 days by September 2022. This indicates a lengthening in inventory holding times until late 2019, followed by improvements in inventory turnover or management efficiency in later periods.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the observed intervals, fluctuating between 31 and 44 days. Minor fluctuations without a clear directional trend suggest consistent effectiveness in credit and collections policies, with a slight improvement noted from 44 days in early 2017 to approximately 31-32 days towards mid to late 2022.

Average Payables Payment Period

The average payables payment period demonstrated high volatility, with initial values around 107 days in mid-2016, sharply decreasing to 60 days by September 2016, and oscillating thereafter. Peaks and troughs were recorded, varying between 51 and 91 days without a defined directional trend. This variability might reflect changing supplier payment strategies or negotiation outcomes over the periods analyzed.

Cash Conversion Cycle

The cash conversion cycle (CCC), which reflects the net time between cash outflows for inventory and cash inflows from receivables, generally increased from 118 days in mid-2016 to a peak around 195 days during 2019. Post-2019, the CCC stabilized, fluctuating between 144 and 155 days. This pattern suggests a lengthening in the operational cash flow cycle culminating in 2019, followed by a period of stabilization, possibly due to strategic efforts in working capital management.