Analog Devices Inc. (NASDAQ:ADI)

Inventory Turnover

The inventory turnover ratio exhibits moderate fluctuations over the periods. Starting around 3.24 in early 2020, the ratio slightly declined to approximately 2.6-2.8 range towards 2023-2024, indicating a gradual slowdown in the speed at which inventory is sold and replenished.

Receivables Turnover

Receivables turnover shows more variability, initially at 9.43 in early 2020, decreasing to a low near 5.0 by early 2021, before recovering gradually to around 7-10 in subsequent periods. This suggests changes in collection efficiency, with a notable dip followed by partial recovery, indicating fluctuations in credit management or customer payment behavior.

Payables Turnover

The payables turnover ratio moves between roughly 6.3 and 10.9, with no consistent trend but several peaks and troughs throughout the periods. This irregularity might reflect changing supplier payment strategies or varying purchasing patterns.

Working Capital Turnover

Working capital turnover is highly volatile, with extreme spikes such as 40.91 in mid-2020 and 49.24 in late 2020, followed by steep declines to values below 5 in most recent periods. These swings indicate large variations in how efficiently working capital generates sales, possibly stemming from temporary operational disturbances or shifting asset and liability management.

Average Inventory Processing Period

The average inventory processing period largely remained stable around 110-117 days until early 2021, followed by a sharp increase to 157 days in early 2021. Afterward, it declined to the mid-90s but then gradually rose again to about 135-137 days in 2023-2024. This pattern may imply intermittent inventory accumulation delays or adjustments in inventory strategy.

Average Receivable Collection Period

There is a clear increase in the average receivable collection period from approximately 39 days in early 2020 to a peak near 73 days in early 2021, then a gradual reduction to ranges between 35 and 52 days thereafter. This suggests a temporary lengthening of customer payment cycles followed by improvement in collection efficiency.

Operating Cycle

The operating cycle tends to lengthen from roughly 150 days in early 2020 to a peak near 230 days in early 2021, before somewhat declining to about 169-182 days in later periods. This rise corresponds with the increases in inventory processing and receivables collection periods, reflecting a temporary slowdown in overall operational efficiency.

Average Payables Payment Period

This metric fluctuates between roughly 33 and 58 days, with no clear trend. These variations may indicate changing payment terms or strategies towards suppliers, possibly influenced by cash flow management considerations.

Cash Conversion Cycle

The cash conversion cycle shows a general increase from approximately 110 days in early 2020 to a peak near 172 days in late 2020, followed by oscillations around 120-150 days more recently. This increase points to a lengthening duration between cash outlays and cash collections, driven primarily by the longer operating cycle and payables payment patterns.

Cost of Sales

The cost of sales exhibited fluctuations over the reported periods. Initially, there was a gradual decrease from approximately 501 million USD in early 2019 to around 455 million USD by the first quarter of 2020. This was followed by a steady increase reaching a peak in the fourth quarter of 2021 at approximately 1.28 billion USD, indicating a significant rise in production or procurement costs during this time. Subsequently, cost of sales declined again, stabilizing around one billion USD in mid-2024 before showing a slight upward trend again towards early 2025.

Inventories

Inventory levels generally increased throughout the period. Starting from about 593 million USD in early 2019, inventories rose steadily with some volatility, reaching a notable peak around the fourth quarter of 2020 and early 2021 at approximately 1.2 billion USD. There was a period of fluctuation where inventories decreased to below one billion USD during 2022 but then resumed increasing again, passing 1.5 billion USD by early 2025. This indicates a buildup of inventory over time, which may reflect strategic stocking, changes in demand expectations, or supply chain adjustments.

Inventory Turnover Ratio

The inventory turnover ratio fluctuated throughout the timeframe with some notable variations. From the available data starting in mid-2019, the ratio initially hovered around 3.2 to 3.3, signaling relatively efficient inventory management. There was a significant dip to approximately 2.33 in early 2021, possibly indicating slower inventory movement or increased inventory levels. The ratio then rebounded to highs near 3.8 during mid to late 2021, before gradually declining through 2023 and 2024 to values around 2.6 to 2.7. This trend suggests a moderate decline in the efficiency of inventory usage or sales conversion over time.

Overall Analysis

Overall, cost of sales and inventories both show an increasing trend over the long term, with cost spikes notably in late 2021 and inventories rising steadily, particularly from late 2019 onward. The inventory turnover ratio presents a varying efficiency trend, with periods of high turnover interspersed with declines. The recent downward trend in turnover ratio alongside increasing inventory levels could indicate challenges in inventory management or sales pace. These patterns suggest increased operational scale but potentially less efficient inventory utilization in recent periods.

Revenue Trends

Revenue exhibited a fluctuating yet generally positive trend through the observed periods. Starting from approximately $1.54 billion in early 2019, revenue experienced a decline through early 2020, reaching a low point of about $1.30 billion in February 2020. Following this, revenue demonstrated a strong recovery and upward trajectory, peaking significantly in late 2021 with values exceeding $3.0 billion. From early 2022 onwards, revenue largely remained above $3.0 billion, although modest decreases appeared towards early 2024, with revenue falling to around $2.15 billion before showing signs of recovery again by mid-2025.

Accounts Receivable Dynamics

Accounts receivable mirrored revenue trends but with greater volatility. Initial values near $714 million in early 2019 decreased until early 2020, then surged sharply in late 2021, reaching peaks above $1.8 billion. After late 2021, the accounts receivable values exhibited fluctuation, dropping notably in early 2024 to approximately $1.0 billion before climbing again by mid-2025 to about $1.38 billion. This signifies variability in the collections process or credit terms during certain periods, particularly around spikes in revenue.

Receivables Turnover Ratio Analysis

Receivables turnover ratios were available from mid-2019 onward, showing initial values between approximately 9.4 and 9.8, indicative of relatively efficient collections. However, a gradual decline followed through late 2020 and into early 2022, with turnover ratios dropping to as low as around 5.0. This decline corresponds with the large increase in accounts receivable noted in this period. Post-early 2022, the turnover ratio improved steadily, climbing back to levels near or above 8.0 by late 2023 and into 2024, indicating improved collection efficiency or tighter credit control during this recovery phase. Nonetheless, some decline occurred again towards mid-2025.

Overall Interpretation

The data suggests a period of significant business cycle impact around early 2020, marked by decreasing revenue and receivables followed by a robust recovery and expansion through late 2021 and early 2022. The spike in accounts receivable combined with a drop in turnover ratio during this recovery could reflect extended payment terms or slower collections in alignment with rapid revenue growth. Improvements in turnover ratios post-2022 indicate an adjustment towards more efficient receivables management. The fluctuations in the latest periods highlight ongoing variability in revenue generation and collection efficiency, warranting careful monitoring to maintain liquidity and operational stability.

Cost of Sales

The cost of sales exhibited some fluctuations over the reported periods. Initially, from early 2019 through late 2020, the cost of sales remained relatively stable, ranging approximately between $455 million and $524 million. A significant increase was observed in January 2022 where the cost of sales more than doubled, reaching over $1.2 billion, which then declined again but stayed above $1 billion for the subsequent quarters. From late 2022 through mid-2024, costs generally trended slightly downward albeit with some volatility, moving from approximately $1.1 billion to below $1 billion. This indicates a period of significant cost escalation followed by a gradual normalization or reduction.

Accounts Payable

Accounts payable followed a pattern of growth and variability. From early 2019 until late 2020, accounts payable hovered around $200 million to $279 million, with some variability. In early 2022, there was a marked increase, peaking around $580 million in early 2023. After this peak, a decline is evident with payable balances decreasing to approximately $368 million by May 2025. This pattern suggests an expansion in credit purchases or vendor financing during the early 2022 to early 2023 period followed by efforts to reduce payables.

Payables Turnover Ratio

The payables turnover ratio shows the frequency at which accounts payable are settled. Data starts from early 2020 with a value of 8.78 and shows some oscillations thereafter. The ratio generally fluctuates between 6.3 and 10.91, with a low point in late 2021 (6.3) and higher values toward mid-2024 (above 10). Higher turnover ratios indicate faster payment to suppliers, while lower ratios suggest slower payment. The observed variations suggest the company adjusted its payment practices over time, with periods of both accelerated and more extended payment cycles potentially reflecting liquidity management or changing supplier terms.

Working Capital

The working capital figures exhibit substantial volatility over the observed periods. Initially, there is a notable decline from approximately 1,135,225 thousand USD in early 2019 to a lower point near 140,637 thousand USD by the beginning of 2020. Following this trough, working capital increases significantly, peaking at around 2,608,005 thousand USD by late 2021. After this peak, a gradual decline is observed, although levels remain elevated relative to the initial periods, ending near 2,897,895 thousand USD in mid-2025. The trend suggests periods of cash and short-term asset management shifts, possibly linked to operational or strategic changes.

Revenue

Revenue demonstrates a generally upward trajectory from early 2019 through early 2023, growing from approximately 1,541,101 thousand USD to a peak of around 3,249,630 thousand USD. This upward trend is marked by some fluctuations, with intermittent declines, particularly noticeable after early 2023, where revenue dips to approximately 2,429,205 thousand USD by early 2025. These fluctuations indicate periods of growth followed by contraction or stabilization, reflecting market conditions, demand variations, or other external factors influencing sales performance.

Working Capital Turnover Ratio

The working capital turnover ratio displays considerable instability and periodic gaps in data during the initial quarters. From the available points, the ratio spikes to very high levels such as 40.91 and 49.24 in certain quarters, indicating that relatively low working capital supported high revenue in these periods. After these spikes, the ratio generally declines, settling between approximately 3.38 and 7.75 in later quarters. This reduction could suggest an increase in working capital relative to revenue or a change in operational efficiency. The ratio's volatility indicates inconsistency in managing short-term assets relative to sales.

Overall Analysis

The data reflect a complex interaction between revenue growth and working capital management. While revenue largely trends upward over the long term, plummeting somewhat in later years, working capital exhibits sharp fluctuations with a strong recovery and increase after early 2020. The working capital turnover ratio's high variance underscores fluctuating efficiency in converting working capital into sales. The later moderation of this ratio aligns with elevated working capital levels and a relatively stabilized, albeit declining, revenue base. These patterns suggest dynamic operational adjustments and market influences affecting the company’s liquidity and sales cycles.

The analysis of the inventory turnover ratio and average inventory processing period over the reported quarters reveals discernible trends with implications for inventory management efficiency and operational dynamics.

Inventory Turnover Ratio

The inventory turnover ratio data begins from February 1, 2020, and spans through May 3, 2025. In early 2020, the ratio hovered around 3.24 to 3.28, indicating relatively stable turnover. Through 2020 and into early 2021, the ratio remained consistent, fluctuating marginally around 3.1 to 3.2.

However, a notable decline occurred in the first quarter of 2022, where the ratio dropped sharply to 2.33. This decline was short-lived, as the following quarters showed a recovery, with ratios increasing to approximately 3.66 to 3.82, signaling improved inventory efficiency during mid-2022.

After this recovery peak, a gradual downward trend is observable from late 2022 through May 2025, with ratios declining to almost 2.66 by the most recent quarter. This trend reflects a slower inventory turnover, potentially indicative of increasing inventory levels or reduced sales velocity in the latter periods.

Average Inventory Processing Period

The average inventory processing period corresponds inversely to the inventory turnover ratio and is reported as the number of days on hand. Starting from February 1, 2020, values near 113 days reflect inventory holding times consistent with the initial turnover ratios.

In late 2021 and early 2022, there is a significant peak—reaching up to 157 days in November 2021—implying an extended period to process inventory, coinciding with the dip in inventory turnover ratio in early 2022. Following this peak, the processing period shortened substantially to approximately 96 to 100 days in early to mid-2022, reflecting improved inventory velocity consistent with the recovery in turnover.

Starting late 2022, a gradual increase in the processing period is observed, climbing from around 114 days and reaching approximately 137 days by May 2025. This upward trajectory suggests increasing inventory levels or slower sales fulfillment, aligning with the declining turnover ratios noted during the same period.

Insights and Implications

The inverse relationship between inventory turnover ratio and average inventory processing period is consistent throughout the data range, underscoring changes in inventory management efficiency. The sharp fluctuations around late 2021 to mid-2022 indicate a period of operational adjustment or market dynamics impacting inventory movement.

The sustained decline in turnover and increase in processing period from late 2022 onwards could highlight challenges such as overstocking, demand shifts, or supply chain disruptions. Continuous monitoring and strategic adjustments may be warranted to optimize inventory levels and maintain operational efficiency.

Receivables Turnover

The receivables turnover ratio exhibits an overall fluctuating trend with a general decline from a high of 9.85 in May 2019 to a low near 5.02 in January 2021. After this dip, the ratio shows a recovery phase, rising gradually and reaching a peak of 10.42 in May 2024. Following this peak, there is a decline through November 2024 and continuing into May 2025. These fluctuations may indicate varying efficiency in the company's collection processes over the analyzed periods.

Average Receivable Collection Period

The average receivable collection period generally moves inversely to the receivables turnover ratio, starting around 39 days in early 2019 and increasing to a peak of 73 days in January 2021. Post peak, the collection period decreases steadily, reaching a minimum of 35 days in May 2024, before rising again moderately to approximately 51 days by May 2025. This pattern suggests cyclical changes in the time taken to collect receivables, with a notable deterioration in early 2021 and subsequent improvement until mid-2024.

Trend Insights

The data indicates a period of reduced efficiency in accounts receivable management during late 2019 through early 2021, as evidenced by a significant drop in receivables turnover and an increase in days outstanding. This could point to challenges in collection processes or changes in customer payment behaviors. Improvements after this period suggest a recovery in collection efficiency, culminating in strong performance measures around mid-2024. However, the recent decline in turnover and rise in collection days toward the end of the dataset may signal emerging issues that could warrant closer monitoring.

Average Inventory Processing Period

The average inventory processing period shows variability over the observed quarters. Starting at 113 days in early 2020, it fluctuated modestly around this range until early 2021, when it experienced a notable increase peaking at 157 days. Following this peak, the period decreased significantly, reaching a low of 96 days in mid-2022. However, from that point onward, the duration trended upward again, reaching approximately 137 days by mid-2024, indicating some instability and possible changes in inventory management or demand patterns during this timeframe.

Average Receivable Collection Period

The average receivable collection period demonstrated a gradual increase from 39 days in early 2020 to a high of 73 days in late 2020. This was followed by a general decline, decreasing to 35 days by early 2024. Subsequently, the period rose again slightly, fluctuating around the 47 to 52 day range towards mid-2024. This pattern may indicate challenges and improvements in collections efficiency, with a peak potentially reflecting extended credit terms or collection difficulties, and later improvements suggesting enhanced receivables management.

Operating Cycle

The operating cycle, which combines the inventory processing and receivable collection periods, mirrors the trends observed in the two components. It increased from around 152 days in early 2020 to a significant peak of 230 days in late 2020, reflecting prolonged working capital requirements during this period. Thereafter, it declined to approximately 153 days by mid-2022, indicating improved operational efficiency. However, the cycle increased again to reach 188 days by mid-2024, suggesting a return to lengthier operating cycles possibly due to slower inventory turnovers or receivables collection delays in this later period.

Payables Turnover Ratio

The payables turnover ratio demonstrates variability over the observed periods. Starting from a ratio of 8.78, the figure increased to a peak around 9.83 but then declined to lower values near 6.3, reflecting a period of slower payables turnover. Subsequently, the ratio rebounded to levels above 9.0, reaching a high of approximately 10.91. Towards the latest periods, the ratio fluctuates between 8.3 and 10.84, indicating renewed activity in managing payables more rapidly. This pattern suggests intermittent fluctuations in the efficiency of accounts payable management, possibly influenced by operational or strategic changes affecting payment timing.

Average Payables Payment Period (Days)

The average payables payment period, expressed in days, inversely correlates with the payables turnover ratio, as expected. The number of days initially indicates a shortening trend from 42 to a low of 37, reflecting faster payments to suppliers. However, this is followed by an increase peaking at 58 days, indicating extended payment terms or slower payment processing. After this peak, the payment period stabilizes around the mid-40s before shortening significantly to approximately 33 days, showing an acceleration in payables. The latest data points indicate some variability between 34 and 44 days, suggesting a fluctuating but relatively shorter payment cycle compared to earlier peaks.

Overall Trends and Insights

Overall, the data reveals alternating periods of faster and slower payment to suppliers, as reflected in the inverse behavior of the payables turnover ratio and average payment period. The company appears to have managed a more extended payment period during certain cycles, potentially to optimize cash flow, followed by phases of quicker payments that increase turnover. The recent trend indicates improved efficiency in processing payables, with turnover ratios reaching their highest levels alongside shorter payment periods. This oscillation might be associated with varying operational demands, supplier negotiations, or broader economic conditions impacting cash management strategies.

The data indicates fluctuations across key working capital metrics including inventory processing period, receivable collection period, payable payment period, and cash conversion cycle over multiple quarterly periods.

Average Inventory Processing Period

This period generally varies between approximately 96 to 157 days after missing initial values. Notably, there is a peak at 157 days in early 2022, followed by a decrease to a low near 96 days in mid-2022. Subsequently, the period demonstrates a gradual increase towards around 137 days by mid-2025. This pattern suggests intermittent efficiency improvements in inventory turnover but also episodes of elongation indicating potential inventory holding challenges or operational adjustments.

Average Receivable Collection Period

The receivable collection days fluctuate within a range from roughly 35 to 73 days. There is a pronounced spike reaching 73 days around early 2022, higher than previous quarters which hovered mostly below 60 days. After this peak, the collection period declines steadily to the mid-30s by mid-2024, but shows a mild increase again nearing 51 days towards mid-2025. This trend reflects varying effectiveness in credit and collection policies, with a temporary extension in 2022 followed by general improvement in collections speed.

Average Payables Payment Period

The payable period exhibits moderate variation between 33 and 58 days. There is a notable increase to 58 days around early 2022, contrasting with generally lower levels in the 30 to 47 day range in other quarters. A reduction trend is observed thereafter, falling to about 33 days by mid-2024, before a slight rise again near 39 days by mid-2025. This suggests changes in payment management strategies, with a brief inclination to delay payments in early 2022 followed by accelerated settlements subsequently.

Cash Conversion Cycle

The cash conversion cycle follows a dynamic path, oscillating between approximately 110 and 172 days. The highest value occurs near 172 days in early 2022 coinciding with peaks in inventory and receivables periods. Following this maximum, the cycle drops to around 110–122 days but trends upward again to the high 140s by mid-2025. The cash conversion cycle's fluctuations mirror shifts in operating working capital management efficiency, signaling periods of stretched capital tie-up and other intervals of comparatively improved liquidity conversion.

Overall, these financial timing metrics highlight episodic pressures around early 2022, represented by extended inventory holdings, slower collections, longer payables, and a significantly elevated cash conversion cycle. Subsequent quarters demonstrate efforts or conditions yielding reductions in these periods, pointing to improved cash flow management. However, later gradual increases suggest ongoing variability in working capital efficiency, requiring continued monitoring to optimize operational cash cycles.