Analog Devices Inc. (NASDAQ:ADI)

Inventory Turnover

The inventory turnover ratio exhibits fluctuation over the years, starting at 3.24 in 2019 and declining to its lowest point of 2.33 in 2021, before recovering slightly to 2.79 by 2024. This suggests a period of slower inventory movement around 2021, followed by moderate improvement.

Receivables Turnover

The receivables turnover ratio shows a downward trend from 9.43 in 2019 to a trough of 5.02 in 2021, indicating slower collection of receivables during this period. Subsequently, there is some recovery, reaching 8.37 in 2023 but dipping again to 7.05 in 2024, reflecting variability in efficiency of receivables management.

Payables Turnover

The payables turnover ratio decreases from 8.78 in 2019 to 6.3 in 2021, denoting longer payment terms or slower payments to suppliers during these years. After 2021, the ratio increases to 8.98 in 2023, indicating quicker payment cycles, but then falls slightly to 8.3 in 2024.

Working Capital Turnover

The working capital turnover ratio displays significant volatility, with a sharp decline from 12.57 in 2019 to 2.81 in 2021, suggesting reduced efficiency in using working capital to generate sales. It rises notably to 10.4 in 2023 but then decreases again to 3.78 in 2024, indicating inconsistent working capital utilization during this timeframe.

Average Inventory Processing Period

The average inventory processing period increases from 113 days in 2019 to a peak of 157 days in 2021, indicating slower inventory movement or increased stock levels during that year. It shortens thereafter to 114 days in 2022, but then lengthens again to 131 days by 2024, showing variability in inventory management efficiency.

Average Receivable Collection Period

The average receivable collection period extends from 39 days in 2019 to 73 days in 2021, highlighting lengthier times to collect receivables. After 2021, it improves to 44 days in 2023, but then rises again to 52 days in 2024, indicating ongoing challenges in receivables collection consistency.

Operating Cycle

The operating cycle increases substantially from 152 days in 2019 to a high of 230 days in 2021, pointing to longer cash-to-cash cycles and potential working capital pressure. It shortens to 169 days in 2022 but rises slightly to 183 days by 2024, signifying moderate variation in operational efficiency.

Average Payables Payment Period

The average payables payment period remains relatively stable with minor fluctuations, moving from 42 days in 2019 to 58 days in 2021, indicating a willingness or necessity to delay payments in that year. It decreases to 41 days in 2023 but rises slightly to 44 days in 2024, reflecting a generally consistent payment approach.

Cash Conversion Cycle

The cash conversion cycle mirrors the operating cycle trend, extending from 110 days in 2019 to 172 days in 2021, which suggests increased time to convert resources into cash. It improves to 122 days in 2022 but rises again to 139 days by 2024, highlighting persistently elevated liquidity cycle durations.

Cost of Sales

The cost of sales exhibited a fluctuating trend over the analyzed years. Initially, there was a slight decline from US$1,977,315 thousand in 2019 to US$1,912,578 thousand in 2020. This was followed by a sharp increase in 2021 to US$2,793,274 thousand, representing a significant upward movement. The upward trend continued and peaked in 2022 with a cost of sales reaching US$4,481,479 thousand. Subsequently, a slight decrease was observed in 2023 and 2024, with values of US$4,428,321 thousand and US$4,045,814 thousand respectively. Despite the decline in the latter years, the overall cost of sales in 2024 remains substantially higher than the initial values in 2019 and 2020, indicating increased production or operational scale over time.

Inventories

Inventory levels increased steadily over the observed period. Beginning at US$609,886 thousand in 2019, inventories remained nearly stable in 2020 with a marginal decrease. From 2021 onwards, there was a pronounced increase, with inventories more than doubling by 2023, reaching US$1,642,214 thousand. Although there was a slight reduction in inventory levels in 2024 to US$1,447,687 thousand, inventory values remained considerably elevated compared to earlier years. This trend suggests an expansion in stock holdings, potentially to support higher sales volumes or strategic inventory positioning.

Inventory Turnover

The inventory turnover ratio demonstrated variability throughout the period. Starting at 3.24 in 2019, it declined slightly to 3.14 in 2020 and then dropped significantly to 2.33 in 2021. A recovery occurred in 2022, with the ratio rising back to 3.2, suggesting improved efficiency in inventory management or faster sales relative to inventory levels during that year. However, the turnover decreased again in 2023 to 2.7 and marginally increased to 2.79 in 2024. Over the span of these years, the inventory turnover ratio indicates some fluctuations in how effectively inventories are converted into sales, with no consistent upward or downward trend but rather a pattern of ups and downs.

The revenue demonstrates a fluctuating trend over the observed periods. Initially, revenue decreased from November 2019 to October 2020 but significantly increased in the following years until peaking in October 2023. However, there is a noticeable decline in revenue by November 2024.

Accounts receivable, less allowances, followed an upward trend from 2019 to 2022, reaching its highest value in October 2022. Subsequently, the amount decreased over the next two years, indicating a potential improvement in receivables management or changes in sales credit policies.

The receivables turnover ratio reveals considerable variability across the periods. Starting high in 2019, it declined markedly in 2020 and 2021, reaching the lowest point in 2021. Thereafter, the ratio improved again in 2022 and 2023 but decreased somewhat by 2024. This pattern suggests fluctuations in the efficiency of collecting receivables, with periods of slower collections followed by improvements, though the most recent year shows a slight reduction in turnover efficiency.

Cost of Sales

The cost of sales exhibited a fluctuating trend over the observed periods. Initially, it decreased slightly from approximately 1.98 billion in 2019 to 1.91 billion in 2020. Subsequently, a significant increase occurred, reaching about 2.79 billion in 2021 and further escalating to a peak near 4.48 billion in 2022. After this peak, costs slightly declined over the next two years, reducing to approximately 4.43 billion in 2023 and further to around 4.05 billion in 2024. Overall, the cost of sales has shown a substantial rise over the six-year period, with a marked spike around 2022.

Accounts Payable

The accounts payable amount demonstrated an upward trajectory from 225.3 million in 2019 to 582.2 million in 2022. This was followed by a decline to approximately 493 million in 2023 and a marginal further decrease to about 487 million in 2024. The growth phase suggests an increase in short-term liabilities or purchases on credit, with a stabilization and slight reduction in more recent periods.

Payables Turnover Ratio

The payables turnover ratio showed variability throughout the period. Starting at 8.78 in 2019, it declined steadily to 6.3 in 2021, indicating a slower rate of payables turnover. In the subsequent years, the ratio increased again, reaching a high of 8.98 in 2023 before decreasing slightly to 8.3 in 2024. These movements imply changes in how efficiently the company manages its payables, with a period of reduced efficiency around 2021 and improved turnover efficiency around 2023.

Overall Summary

The analysis reveals significant cost escalations, particularly from 2020 through 2022, reflecting either increased production, higher input costs, or expanded sales activities. The concurrent rise in accounts payable suggests reliance on credit from suppliers aligning with increased operational scale or investment during this period. Changes in the payables turnover ratio indicate fluctuating efficiency in payables management, with a notable dip in turnover speed around 2021 followed by recovery toward 2023. The recent slight reductions in cost of sales and accounts payable, alongside a stable turnover ratio, might reflect a moderation in growth or strategic operational adjustments.

Working Capital

The working capital generally demonstrates an upward trend over the analyzed periods. Starting from approximately $476 million in late 2019, it increased significantly to around $1.15 billion by the end of 2020. This growth continued more markedly by late 2021, reaching about $2.61 billion. Although there was a slight decrease to roughly $2.50 billion in late 2022, working capital declined more substantially to about $1.18 billion in late 2023, before rising again to approximately $2.50 billion in late 2024. Overall, fluctuations indicate periods of capital investment and possible variations in short-term asset and liability management.

Revenue

Revenue exhibited a fluctuating but generally upward movement until late 2023, starting from approximately $6.0 billion in 2019 and peaking at around $12.3 billion in late 2023. Between 2019 and 2020, revenue decreased slightly to roughly $5.6 billion; however, it rebounded strongly in 2021 to about $7.3 billion. The most significant increase occurred between 2021 and 2022, where revenue grew to approximately $12.0 billion. This higher level was maintained through late 2023. In the final period analyzed, late 2024, revenue declined substantially to around $9.4 billion, indicating potential challenges in sales or market conditions.

Working Capital Turnover

The working capital turnover ratio shows considerable variability across the periods. In 2019, the ratio was relatively high at 12.57, suggesting efficient utilization of working capital to generate revenue. However, the ratio declined sharply to 4.86 in 2020 and further decreased to 2.81 in 2021, implying less efficient use of working capital relative to revenue generation during these years. The ratio improved to 4.81 in 2022 and saw a marked increase to 10.4 by late 2023, corresponding with the revenue peak and suggesting enhanced operational efficiency. In the last observed period, the ratio dropped again to 3.78, consistent with the decrease in revenue, indicating reduced turnover efficiency.

Summary of Trends and Insights

Overall, the data reflect dynamic changes in working capital and revenue, with working capital largely growing in tandem with revenue increases but also showing notable fluctuations. The working capital turnover ratio's variability suggests periods where the company either optimized or underutilized its working capital concerning sales generation. The sharp revenue decline in the latest period, together with a decrease in working capital turnover, may signal operational or market challenges affecting efficiency and sales performance. Monitoring cash flow management and operational efficiency will be important for maintaining balance between assets and liabilities in future periods.

The financial data reveals key trends related to inventory management over a six-year period. The analysis focuses on two primary metrics: inventory turnover ratio and the average inventory processing period, both of which provide insights into the efficiency of inventory usage and stock management practices.

Inventory Turnover Ratio

The inventory turnover ratio shows a fluctuating trend throughout the period. It started relatively strong at 3.24 in late 2019, then slightly declined to 3.14 in 2020. A more significant drop occurred in 2021, declining to 2.33, indicating a slower rate of inventory being sold or used. In 2022, the ratio recovered to 3.2, suggesting a return to higher efficiency or faster inventory movement. However, the following years saw another dip with a ratio of 2.7 in 2023 and a modest increase to 2.79 in 2024. Overall, the trend suggests variability in inventory turnover, with particularly notable dips in 2021 and 2023.

Average Inventory Processing Period

The average inventory processing period, expressed in days, exhibits an inverse relationship with the turnover ratio trends. It began at 113 days in 2019 and gradually increased to 116 days in 2020. A sharp increase occurred in 2021 when the period extended to 157 days, indicating slower inventory movement or longer holding times. This measure improved significantly in 2022 to 114 days, aligning with the recovery observed in the turnover ratio that year. Subsequently, the average period increased again to 135 days in 2023 and slightly decreased to 131 days in 2024. This pattern confirms variability and suggests occasional challenges in inventory liquidation efficiency, especially in 2021 and 2023.

In summary, the inventory turnover and processing period metrics indicate fluctuating efficiency in inventory management across the analyzed years. The sharp declines in turnover and simultaneous increases in average inventory days in 2021 and 2023 point to times of slower inventory movement which could be attributed to market conditions, supply chain disruptions, or changes in demand. The partial recoveries observed in 2022 and 2024 suggest efforts to restore or improve inventory management efficiency. Continuous monitoring and adjustments appear necessary to stabilize and optimize these metrics moving forward.

Receivables Turnover

The receivables turnover ratio demonstrated a fluctuating trend over the examined periods. It started at 9.43 in 2019, then declined significantly to 7.6 in 2020, followed by a further drop to 5.02 in 2021. Subsequently, there was an improvement to 6.67 in 2022, continuing to increase to 8.37 in 2023 before decreasing again to 7.05 in 2024. This pattern indicates variability in the rate at which receivables are collected, with a notable dip around 2021 and partial recoveries in subsequent years.

Average Receivable Collection Period

The average receivable collection period exhibited an inverse pattern to the receivables turnover ratio, consistent with the theoretical relationship between these measures. Initially, the number of days increased from 39 in 2019 to 48 in 2020, then peaked at 73 days in 2021, reflecting slower collection of receivables. Following this peak, the collection period improved to 55 days in 2022 and further to 44 days in 2023, before lengthening again to 52 days in 2024. These shifts suggest varying efficiency in credit and collection policies or changes in customer payment behavior over time.

Overall Analysis

The trends reveal a period of reduced efficiency in receivables management around 2021, as indicated by the lower turnover ratio and longer collection period. Improvements were seen in the subsequent two years, though the most recent data point suggests a slight decline in efficiency again. The fluctuations may warrant further investigation to understand underlying factors such as changes in credit terms, customer base, or economic conditions affecting payment patterns.

Average Inventory Processing Period

The average inventory processing period showed variability over the years. It started at 113 days in 2019 and increased slightly to 116 days in 2020. A significant rise was observed in 2021, with the period extending to 157 days. However, it decreased sharply to 114 days in 2022, followed by an increase to 135 days in 2023 and a slight decline to 131 days in 2024. This pattern suggests fluctuations in inventory turnover efficiency, with a notable peak in 2021.

Average Receivable Collection Period

The average receivable collection period displayed an overall upward trend from 2019 to 2021. It escalated from 39 days in 2019 to a peak of 73 days in 2021. Subsequently, it improved to 55 days in 2022 and further to 44 days in 2023, before increasing moderately to 52 days in 2024. This indicates a period of slower collection around 2021, followed by improved accounts receivable management, though with some recent reversals.

Operating Cycle

The operating cycle lengthened significantly in 2021, reaching 230 days compared to 152 days in 2019. It decreased to 169 days in 2022, then slightly increased to 179 days in 2023 and 183 days in 2024. This trend reflects the combined effects of inventory processing and receivable collection periods, showing an overall lengthening compared to the earlier years, with some stabilization in the most recent periods.

Payables Turnover

The payables turnover ratio experienced a decline from 8.78 in 2019 to a low of 6.3 in 2021, indicating a slower rate of paying suppliers during that period. Following 2021, the ratio improved to 7.7 in 2022 and further to 8.98 in 2023, suggesting a quicker payment cycle. However, in 2024, the ratio slightly decreased to 8.3, though it remained higher than the earlier years.

Average Payables Payment Period

The average payment period increased from 42 days in 2019 to 58 days in 2021, implying longer durations to settle payables during that time. Subsequently, this period reduced to 47 days in 2022 and reached a low of 41 days in 2023, indicating an acceleration in payment timing. In 2024, the payment period slightly increased again to 44 days, but still was close to the earlier lower values.

Overall Assessment

The trends in the payables turnover ratio and the average payables payment period exhibit an inverse relationship, as expected. The changes suggest that the company took longer to pay suppliers during 2020 and 2021, which may reflect strategic cash management or external pressures. From 2022 onwards, payment efficiency improved significantly, with quicker payables turnover and shorter payment periods. The slight adjustments in 2024 indicate a possible moderation but the payment cycle remains relatively efficient compared to the earlier period.

Average Inventory Processing Period

The average inventory processing period fluctuated over the observed years. It started at 113 days in 2019, rose slightly to 116 days in 2020, then experienced a significant increase to 157 days in 2021. Subsequently, it decreased to 114 days in 2022, followed by an increase to 135 days in 2023, and a slight decline to 131 days in 2024. This pattern suggests variability in inventory turnover efficiency, with occasional periods of slower inventory movement.

Average Receivable Collection Period

The receivable collection period showed an increasing trend initially, moving from 39 days in 2019 to a peak of 73 days in 2021. After this peak, it improved considerably, reducing to 55 days in 2022 and further to 44 days in 2023. However, it slightly increased again to 52 days in 2024. This indicates some volatility in the company's ability to collect receivables, with notable improvements following a period of lengthened collection times.

Average Payables Payment Period

The payables payment period remained relatively stable, with small fluctuations around the low to mid-40 day range. Starting at 42 days in 2019, it slightly increased to 43 days in 2020 and jumped to 58 days in 2021, then decreased to 47 days in 2022. The period shortened further to 41 days in 2023 before rising marginally to 44 days in 2024. The spike in 2021 suggests a period during which the company extended its payment terms, but generally, it maintains a consistent payment period.

Cash Conversion Cycle

The cash conversion cycle, which represents the net time between cash outflow and inflow, showed considerable variability. It started at 110 days in 2019, increased progressively to 121 days in 2020 and then surged to 172 days in 2021, indicating slower cash flow turnover. Improvements followed with a reduction to 122 days in 2022, but the cycle lengthened again to 138 days in 2023 and 139 days in 2024. Overall, the cycle remains elevated compared to the earlier years, suggesting longer cash tied up in operations in recent periods.