Applied Materials Inc. (NASDAQ:AMAT)

Inventory Turnover

The inventory turnover ratio shows moderate fluctuations over the years with an initial increase from 2.37 in 2019 to 2.82 in 2021, followed by a decline to 2.33 in 2022, and a recovery back up to 2.63 by 2024. This pattern indicates variable efficiency in inventory management, with the highest efficiency observed in 2021 and improvement again towards 2024.

Receivables Turnover

The receivables turnover ratio declined notably from 5.77 in 2019 to a low of 4.25 in 2022, suggesting slower collection of receivables during this period. From 2023 onward, there is an upward trend to 5.19 in 2024, indicating a recovery in collection efficiency.

Payables Turnover

Payables turnover ratio largely decreased from 8.58 in 2019 to 7.86 in 2022, reflecting slower payments to suppliers. Subsequently, it sharply increased to 9.56 in 2023 before slightly dropping to 9.09 in 2024, which may imply accelerated payment terms or improved supplier relationships in the latter years.

Working Capital Turnover

The working capital turnover started at 2.54 in 2019, declined to a low of 1.93 in 2020, and then increased to a peak of 3.02 in 2022. After 2022, it declined again, falling to 2.13 in 2024. This suggests some volatility in how effectively the company utilized its working capital to generate sales, with the best performance in 2022.

Average Inventory Processing Period

This period decreased from 154 days in 2019 to 129 days in 2021, showing quicker inventory turnover. However, it increased again to 157 days in 2022 before gradually decreasing to 139 days by 2024. This reflects a less consistent inventory management cycle but overall improvement after 2022.

Average Receivable Collection Period

The collection period remained stable at 63 days in 2019 and 2020 but increased significantly to 78 days in 2021 and further to 86 days in 2022, indicating slower receivables collection. This reversed in 2023 and 2024 with reductions to 71 and 70 days respectively, pointing to improved collection efficiency.

Operating Cycle

The operating cycle followed a decreasing trend from 217 days in 2019 to 207 days in 2021, then sharply increased to 243 days in 2022, before declining again to 209 days in 2024. This suggests that the overall operational efficiency worsened notably in 2022 but improved toward 2024, approaching earlier levels.

Average Payables Payment Period

This metric remained relatively stable around 43-44 days from 2019 to 2021, increasing slightly to 46 days in 2022, followed by a marked decrease to 38 days in 2023 and a slight increase to 40 days in 2024. The pattern indicates variable payment timings but generally shorter payment periods in the latter years.

Cash Conversion Cycle

The cash conversion cycle showed a gradual decrease from 174 days in 2019 to 163 days in 2021, suggesting improving cash flow efficiency. This was reversed in 2022 with an increase to 197 days, reflecting slower cash recovery. Subsequently, the cycle shortened in 2023 and 2024 to 181 and 169 days respectively, indicating a trend towards improved liquidity management post-2022.

Cost of Products Sold

The cost of products sold has demonstrated a consistent upward trend over the analyzed periods, with an increase from $8,222 million in late 2019 to $14,279 million in late 2024. Notable growth occurred between 2020 and 2021 as well as in subsequent years, indicating rising expenses associated with production or higher sales volumes.

Inventories

Inventory levels increased from $3,474 million in 2019 to a peak of $5,932 million in 2022, followed by a gradual decline to $5,421 million by 2024. This pattern suggests initial accumulation of stock, possibly in anticipation of increased demand or supply chain strategies, then a modest reduction potentially reflecting improved inventory management or demand normalization.

Inventory Turnover

The inventory turnover ratio exhibited fluctuations, starting at 2.37 in 2019 and rising to 2.82 in 2021, which indicates more efficient inventory usage or faster sales relative to inventory held. However, it declined to 2.33 in 2022 before recovering to 2.63 by 2024. This volatility might point to varying operational efficiencies or changes in demand dynamics impacting how quickly inventory is converted into sales.

Net Revenue

Net revenue demonstrated a consistent upward trend over the examined periods, increasing from 14,608 million US dollars in 2019 to 27,176 million in 2024. The growth appears steady, with notable jumps between 2020 and 2021, and continued acceleration through 2023 and 2024, indicating strong sales expansion or improved market demand.

Accounts Receivable, Net

The net accounts receivable balance showed a general increase from 2,533 million US dollars in 2019 to a peak of 6,068 million in 2022. After peaking, it decreased to 5,165 million in 2023 but rose slightly again to 5,234 million in 2024. This fluctuation suggests varying collection cycles or credit terms, with a significant rise in 2021 and 2022 possibly indicating extended credit given to customers or increasing sales on credit before stabilizing.

Receivables Turnover Ratio

The receivables turnover ratio exhibited a declining trend from 5.77 in 2019 to a low of 4.25 in 2022, reflecting a slower collection process or longer credit periods during this interval. However, improvements were seen in 2023 and 2024, with the ratio rising to 5.13 and 5.19 respectively, suggesting enhanced efficiency in receivables collection or tighter credit management in the most recent years.

The analysis of the financial data reveals several key trends over the examined periods.

Cost of Products Sold

The cost of products sold demonstrates a consistent upward trend throughout the periods, increasing from US$8,222 million in 2019 to US$14,279 million in 2024. This represents a significant rise, indicating higher production or procurement costs over time. The growth appears to slow slightly in the most recent years but remains substantially higher than the initial data point.

Accounts Payable

Accounts payable also shows a general increase from US$958 million in 2019 to US$1,570 million in 2024. There is a steady rise up to 2022, reaching US$1,755 million, followed by a decrease in 2023 to US$1,478 million, and a subsequent increase in 2024. This fluctuation suggests some variation in payment terms or supplier relationships during the last two years.

Payables Turnover Ratio

The payables turnover ratio exhibits some variability over the same period. It declined gradually from 8.58 in 2019 to 7.86 in 2022, indicating a slower rate of payment to suppliers or longer credit terms. However, this trend reverses in 2023 and 2024, with the ratio increasing sharply to 9.56 and then slightly decreasing to 9.09, suggesting accelerated payments or tighter credit terms in those years.

Overall, the increasing cost of products sold alongside the fluctuating accounts payable and varying payables turnover ratio may reflect changes in operational scale, supplier negotiations, and cash management policies. The higher payables turnover ratios in the latest years imply improved efficiency in settling payables compared to the immediate prior years.

Working Capital

The working capital shows an overall increasing trend from 2019 to 2024, rising from $5,759 million to $12,752 million. There was a significant jump between 2019 and 2020, followed by a moderate increase in 2021. A slight decrease in 2022 interrupts the upward trajectory, before the trend resumes with notable growth through 2023 and 2024.

Net Revenue

Net revenue has demonstrated consistent growth over the six-year period, moving from $14,608 million in 2019 to $27,176 million in 2024. The most substantial increase occurred between 2020 and 2021, with continued but more gradual revenue growth observed in the subsequent years. This steady rise suggests a strong revenue expansion strategy and market demand.

Working Capital Turnover

The working capital turnover ratio fluctuated during the period. Beginning at 2.54 in 2019, it declined to 1.93 in 2020, indicating less efficient use of working capital that year. The ratio then improved to 2.36 in 2021 and peaked at 3.02 in 2022, reflecting a period of enhanced operational efficiency. However, the ratio decreased again in 2023 and 2024 to 2.25 and 2.13 respectively, signaling a slight reduction in efficiency despite the increased working capital and revenue. This pattern may warrant closer examination of working capital management and its alignment with sales growth.

Inventory Turnover

The inventory turnover ratio demonstrates moderate fluctuations over the analyzed period. It increased from 2.37 in 2019 to a peak of 2.82 in 2021, indicating an improved efficiency in managing and selling inventory during that time. However, this ratio declined to 2.33 in 2022, suggesting a temporary slowdown in inventory movement, before recovering to 2.47 in 2023 and further increasing to 2.63 in 2024. Overall, the trend indicates an improvement in inventory management efficiency after 2021, following a brief dip in 2022.

Average Inventory Processing Period

The average inventory processing period, measured in days, inversely correlates with the inventory turnover trend. It decreased from 154 days in 2019 to a low of 129 days in 2021, consistent with the peak inventory turnover ratio, reflecting faster inventory movement and turnover. In 2022, this period increased significantly to 157 days, mirroring the dip in turnover ratio, indicating slower processing of inventory. Subsequent years show a decline to 148 days in 2023 and 139 days in 2024, suggesting a return to more efficient inventory processing but not yet reaching the lowest level observed in 2021.

Summary of Trends

The financial data reveals a cyclical behavior in inventory management metrics over the six-year period. The company achieved its highest efficiency in inventory turnover and processing speed around 2021. A notable decline occurred in 2022, reflecting potential operational or market challenges impacting inventory handling. Recovery and improvement are apparent in the latest years, pointing to corrective measures or improved market conditions. These metrics suggest focused efforts on optimizing inventory levels and turnover to maintain operational efficiency.

The financial data reveals notable trends regarding the management of receivables over the observed periods.

Receivables Turnover

The receivables turnover ratio shows a decline from 5.77 in 2019 to a low point of 4.25 in 2022, indicating a decrease in how efficiently the company collected its accounts receivable during this period. However, this trend reverses starting in 2023, with the ratio increasing to 5.13 and slightly rising further to 5.19 in 2024, suggesting an improvement in collection efficiency towards the later years.

Average Receivable Collection Period

Correspondingly, the average receivable collection period increased steadily from 63 days in 2019 and 2020 to a peak of 86 days in 2022, reflecting longer periods taken to collect receivables, thus aligning inversely with the decreasing turnover ratio. This trend then reverses in 2023 and 2024, with collection periods dropping to 71 and 70 days respectively, further supporting the interpretation of improved receivables management in more recent years.

Overall, the data indicates a period of weakening efficiency in receivables collection until 2022, followed by a recovery and enhanced performance in the subsequent years.

The data reveals notable fluctuations in the company's inventory management, receivable collection, and overall operating cycle over the analyzed period.

Average Inventory Processing Period

The average inventory processing period exhibited variability, starting at 154 days in the earliest period, declining to a low of 129 days by 2021. However, it subsequently increased to 157 days in 2022, before trending downward again to 139 days by 2024. This suggests intermittent shifts in inventory management efficiency, with periods of both improved and prolonged inventory turnover.

Average Receivable Collection Period

The receivable collection period remained stable at 63 days initially (2019-2020), then increased significantly to a peak of 86 days in 2022, implying a lengthening in the time taken to collect receivables. There was a subsequent improvement in 2023 and 2024, with collection periods reduced to 71 and 70 days, respectively, though these remain higher than the initial values.

Operating Cycle

The operating cycle closely mirrored the trends in inventory and receivables. It began at 217 days in 2019 and gradually decreased to 207 days by 2021, indicating enhanced operational efficiency. However, it rose sharply to 243 days in 2022—the highest observed—before decreasing again to 209 days by 2024. This pattern points to variability in the company's efficiency in converting inventory and receivables back into cash over the years.

Overall, the data reflects periods of improved operational efficiency interspersed with intervals of slower asset turnover, particularly around 2022. The company's ability to manage inventory and receivables appears to have faced temporary challenges, but subsequent improvements indicate responsive adjustments to maintain efficiency.

Payables Turnover

The payables turnover ratio exhibited a declining trend from 8.58 in 2019 to 7.86 in 2022, indicating a gradual decrease in the frequency with which payables were settled during this period. However, there is a notable recovery beginning in 2023, with the ratio increasing significantly to 9.56, followed by a slight decrease to 9.09 in 2024. This suggests an improvement in the management of payables in the most recent years compared to the earlier decline.

Average Payables Payment Period

The average number of days taken to pay suppliers initially rose from 43 days in both 2019 and 2020 to 46 days in 2022, aligning with the decreasing payables turnover trend observed over the same timeframe. Starting in 2023, the payment period shortens markedly to 38 days, before increasing slightly to 40 days in 2024. This reduction in payment period in recent years is consistent with the observed increase in payables turnover and suggests a more efficient payment process.

Overall Pattern

From 2019 through 2022, the company's payables management shows a trend toward longer payment periods and lower turnover rates, which may imply a shift in cash flow management or negotiation strategies with suppliers. The reversal of this trend in 2023 and 2024 indicates a strategic adjustment leading to quicker payments and more frequent turnover of payables. This shift could reflect improved liquidity positions or changes in supplier relationship management, contributing to enhanced operational efficiency.

The analysis of the annual financial indicators reveals notable fluctuations in the company's working capital management metrics over the examined years.

Average Inventory Processing Period

This metric exhibited a decrease from 154 days in 2019 to 129 days in 2021, indicating improved inventory turnover. However, it subsequently increased sharply to 157 days in 2022 before trending downward to 139 days by 2024. The recent reduction suggests some enhancement in inventory efficiency but still remains above the 2021 low.

Average Receivable Collection Period

The receivable collection period remained stable at 63 days in 2019 and 2020 but rose significantly to 78 days in 2021 and further peaked at 86 days in 2022. After this peak, there was improvement with reductions to 71 days in 2023 and marginally to 70 days in 2024. This pattern reflects challenges in collecting receivables that began around 2021, followed by gradual recovery.

Average Payables Payment Period

The payable period was steady at around 43-44 days from 2019 to 2021, increased moderately to 46 days in 2022, then decreased to 38 days in 2023, rising slightly again to 40 days in 2024. The fluctuations suggest some variability in payment timing policy but generally stable management of payables within a narrow range.

Cash Conversion Cycle

The cash conversion cycle decreased from 174 days in 2019 to 163 days in 2021, reflecting improved working capital efficiency during this period. However, it then increased notably to 197 days in 2022, mainly driven by higher inventory and receivables periods. By 2024, the cycle reduced to 169 days, indicating partial recovery, though still higher than pre-2022 levels.

Overall, the company exhibited an initial improvement in working capital efficiency up till 2021, followed by a deterioration in 2022, and partial normalization thereafter. The extended collection and inventory periods during the downturn suggest challenges in turnover and customer payments, impacting the cash conversion cycle adversely. Recent trends imply efforts toward regaining efficiency, but the company has yet to reach the earlier, more favorable levels seen before 2022.