Celgene Corp. (NASDAQ:CELG)

The analysis of the financial ratios over the reported periods reveals several notable trends and variations in the company's operational efficiency and cash flow management.

Inventory Turnover

The inventory turnover ratio generally exhibited a declining trend from early 2015 through 2017, reaching a low around 0.84 to 0.85. However, starting from late 2017, it improved significantly, rising to approximately 1.39 by the third quarter of 2019. This indicates an enhancement in inventory management, reflecting faster movement of inventory in recent periods.

Receivables Turnover

The receivables turnover ratio showed moderate fluctuations but remained relatively stable between 6.5 and 7.4 over the entire timeline. There was a slight upward trend noted in late 2017 and mid-2018, suggesting a modest improvement in the collection of receivables. The ratio peaked at 7.39 mid-2018 before exhibiting some minor decreases.

Payables Turnover

The payables turnover ratio fluctuated significantly without a clear trend. It ranged from approximately 1.4 to 2.2, with noticeable dips around mid-2017 and late 2018 through 2019. These variations suggest inconsistent payment patterns to suppliers, potentially reflecting changing credit terms or cash flow management strategies.

Working Capital Turnover

The working capital turnover ratio experienced substantial volatility. After relatively consistent levels around 1.2 to 1.5 from 2015 to early 2018, there was a pronounced spike in early 2018 reaching 6.0. This peak was followed by a decline, yet the ratio remained elevated compared to earlier years, stabilizing around 1.8 by late 2019. This indicates episodic increases in turnover efficiency, possibly related to changes in operational management or significant one-off events.

Average Inventory Processing Period

The average inventory processing period showed an increasing trend from 350-385 days in early 2015 to a peak exceeding 430 days in 2016 and early 2017, indicating slowing inventory movement. From 2018 onwards, this period significantly shortened to fewer than 300 days by 2019, corroborating the improved inventory turnover ratio and suggesting enhanced inventory management.

Average Receivable Collection Period

The collection period hovered steadily around 53 to 57 days throughout most periods, with minor improvements around 2018 and 2019 where it dropped slightly to about 49-51 days. This stability suggests consistent credit collection policies with modest gains in efficiency more recently.

Operating Cycle

The operating cycle lengthened from approximately 400 days in early 2015 to a high near 485 days in 2016. Subsequently, there was a marked reduction to around 314 days by the third quarter of 2019, indicating improved overall operational efficiency and quicker conversion of inventory and receivables into cash.

Average Payables Payment Period

The average payables payment period exhibited fluctuations, increasing from about 184 days in early 2015 to peaks over 240 days in late 2017 and again high levels in 2019. This pattern might suggest strategic delay in payments to suppliers, possibly to optimize cash retention, although it varies inconsistently across quarters.

Cash Conversion Cycle

The cash conversion cycle experienced notable volatility with high values above 240 days from 2015 through 2017, indicative of slower cash recovery from operational activities. A significant decline occurred from 2018 onwards, reaching a low near 69 days by mid-2019, suggesting a substantial improvement in the cycle time for converting investments in inventory and receivables back into cash.

In summary, the data indicate meaningful improvements in inventory turnover, operating cycle, and cash conversion cycle since 2017, reflecting enhanced operational efficiency and cash flow management. Receivable collection remains stable with minor gains, while payables turnover and payment periods display greater variability, implying adaptation of payment terms or cash management strategies. The working capital turnover spike in early 2018 is notable and may warrant further investigation to understand underlying causes.

The cost of goods sold (COGS), excluding amortization of acquired intangible assets, exhibited a generally increasing trend over the analyzed periods. Starting at 104 million USD at the end of the first quarter of 2015, the value fluctuated mildly around the low 100s before showing noticeable growth beginning in early 2018. By the first quarter of 2019, COGS reached 140 million USD, demonstrating a significant upward movement particularly in the later quarters.

Inventory values showed a gradual increase from 387 million USD in the first quarter of 2015 to a peak above 555 million USD by mid-2018. Subsequently, the inventory levels declined, bottoming around 442 million USD in the third quarter of 2019, before slightly rebounding towards the end of the period under review. This pattern suggests an accumulation phase followed by efforts to reduce or optimize inventory holdings.

The inventory turnover ratio started at 1.04 in the first quarter of 2015 and experienced a slow decline until late 2017, reaching lows around 0.84-0.85. From 2018 onward, there was a marked improvement, with the turnover ratio increasing to 1.39 by the third quarter of 2019. This improvement indicates enhanced efficiency in managing inventory relative to sales, as the company was able to generate more sales per unit of inventory held towards the end of the period.

Summary of trends

The COGS generally rose over the examined timeline, reflecting increased production or sales volume.

Inventory levels increased initially but were later reduced, implying strategic inventory management adjustments.

The inventory turnover ratio decreased initially, signaling slower inventory movement, then improved significantly, indicating enhanced operational efficiency.

Analysis of the quarterly financial data reveals several pertinent trends and observations regarding the company's sales performance, receivables management, and related financial metrics over the examined period.

Net Product Sales

There is a consistent upward trajectory in net product sales from March 2015 through September 2019. Starting at approximately 2,055 million USD, sales generally increase quarter-over-quarter with minor fluctuations. Notably, sales exceed 4,500 million USD by late 2019, indicating robust growth over the nearly five-year span. The incremental increases appear steady, without significant volatility, signaling sustained demand and possibly effective market penetration or pricing strategies.

Accounts Receivable, Net of Allowances

Accounts receivable also exhibit a rising trend across the same timeframe, advancing from around 1,179 million USD to more than 2,300 million USD. This reflects higher outstanding customer balances alongside increased sales volumes. Although total receivables grow, the figures do not suggest disproportionate escalation compared to sales, which might otherwise raise concerns around collection efficiency or credit risk.

Receivables Turnover Ratio

The receivables turnover ratio remains relatively stable, fluctuating within a narrow band between approximately 6.45 and 7.39 throughout the observed quarters. This steadiness implies consistent effectiveness in collecting receivables relative to sales. Periodic minor variations do not indicate systemic issues but rather normal operational dynamics. The slight increases in turnover in later periods may suggest improving collections or credit management practices.

Overall, the data suggest strong sales growth complemented by proportionate growth in receivables and steady collection efficiency. These trends indicate that the company is successfully scaling its revenue base while maintaining prudent controls on credit and collections.

Cost of Goods Sold (COGS)

The cost of goods sold, excluding amortization of acquired intangible assets, exhibited a generally increasing trend over the analyzed periods. Starting at US$104 million at the end of Q1 2015, the COGS showed slight fluctuations initially but began to rise more distinctly from 2017 onward. The most notable increases occurred in 2018 and 2019, peaking at US$169 million by Q4 2018 and remaining elevated above US$140 million in the subsequent quarters. This upward trajectory indicates an overall growth in the volume or cost intensity of goods sold over time.

Accounts Payable

Accounts payable also demonstrated a rising pattern over the period. Beginning at US$204 million in Q1 2015, the payable balance increased gradually, with some intermittent fluctuations. A marked increase was observed in late 2018 and through 2019, reaching a high of US$421 million in Q2 2019. This increase could reflect extended payment terms, increased purchasing activity, or accumulation of liabilities.

Payables Turnover Ratio

The payables turnover ratio, which measures the frequency of payments made to suppliers relative to accounts payable, showed a generally decreasing trend with some volatility. Starting near 2.0 in early 2015, the ratio declined overall, falling to approximately 1.4 by the fourth quarter of 2018 and fluctuating around that level into 2019. This reduction suggests that the company is taking longer to pay its suppliers over time, consistent with the growth in accounts payable. Periodic increases in the ratio indicate occasional acceleration in payments.

Overall Insights

The increasing cost of goods sold combined with rising accounts payable and a declining payables turnover ratio suggests an expanding operational scale coupled with lengthening payment terms or liquidity management adjustments. The company appears to be managing its payables strategically as liabilities grow, potentially to maintain cash flow while facing higher costs of goods sold. Continuous monitoring is advisable to ensure that payables remain within sustainable limits while supporting operational demands.

The analysis of the quarterly financial data reveals several notable trends in the working capital, net product sales, and working capital turnover over the examined periods.

Working Capital

Working capital fluctuated significantly across the quarters, starting at 7,568 million USD in March 2015, with some dips and recoveries observed through the years. It peaked at 11,905 million USD by December 2017. However, in the subsequent quarters of 2018, working capital showed a marked decline, reaching lows near 2,351 million USD in June 2018. After this trough, there was a recovery trend through 2019, with working capital climbing back above 9,000 million USD by September 2019. This volatility suggests periods of both asset accumulation and drawdown, possibly reflecting changes in inventory, receivables, or payables management.

Net Product Sales

Net product sales demonstrated a steady upward trajectory throughout the period. Beginning at 2,055 million USD in March 2015, sales steadily increased every quarter, reaching 4,518 million USD by September 2019. This consistent growth indicates strong market performance and increasing revenue generation capacity during the analyzed timeframe without significant sales downturns.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently the working capital supports sales, displayed considerable variability. Initially, the ratio hovered around 1.0 to 1.5, reflecting moderate efficiency. Toward the end of 2017 and beginning of 2018, a sharp spike is evident, with turnover reaching an extraordinary high of 6.0 in June 2018, followed by a decline back to around 1.8 by September 2019. This spike aligns temporally with the significant contraction in working capital during early 2018, implying that sales were maintained or increased despite lower working capital levels, thus boosting the turnover ratio temporarily. The subsequent normalization suggests a rebalancing of the relationship between sales and working capital.

Overall, the data points to robust and growing sales performance accompanied by fluctuations in working capital levels and efficiency. The heightened working capital turnover during early 2018 highlights an unusual period of efficiency or constrained working capital, which later stabilized as working capital was restored.

The analysis of the inventory management metrics over the specified periods reveals several noteworthy trends and shifts. Inventory turnover ratio and average inventory processing period exhibit an inverse relationship, as expected, reflecting changes in operational efficiency and inventory management effectiveness over time.

Inventory Turnover Ratio

The inventory turnover ratio generally declined from early 2015 through the end of 2017. Starting at 1.04 in the first quarter of 2015, it gradually decreased to a low point around 0.85 by the end of 2016 and remained relatively stable throughout 2017 with only minor fluctuations.

In 2018, the ratio showed modest recovery, gradually increasing from 0.9 to 1.05 by the third quarter. A more pronounced improvement occurred in 2018's final quarter and into 2019, with ratios rising significantly and peaking at 1.39 in the third quarter of 2019. This upward trend suggests enhanced efficiency in inventory utilization towards the latter period.

Average Inventory Processing Period

The average inventory processing period exhibited an opposite trend to the inventory turnover ratio, reflecting the inverse nature of the two metrics. Beginning at 350 days in the first quarter of 2015, the duration increased steadily, reaching a peak of approximately 437 days in the mid-2017 period.

Following this peak, there was a notable decline starting in late 2017 and continuing through 2018 and into 2019. The processing period dropped from the high 400s range down to 263 days by the third quarter of 2019. This decrease indicates a shortening of the time inventory is held before being processed or sold, aligning with the increase in inventory turnover ratio.

Overall, the data suggest that inventory management became progressively less efficient from 2015 through mid-2017, as evidenced by decreasing turnover and increasing processing days. However, beginning in late 2017 and continuing through 2019, there is a clear improvement in managing inventory levels, shown by rising turnover and decreasing processing periods. This shift may be attributed to operational changes, better inventory control practices, or changes in demand dynamics leading to faster inventory movement and reduced holding times.

Receivables Turnover

The account receivables turnover ratio exhibits moderate fluctuations over the analyzed periods, ranging between approximately 6.45 and 7.39 times. Initially, there is a slight decline from 6.71 at the end of Q1 2015 to a low of 6.45 by Q4 2015. Subsequently, a gradual upward trend is observed reaching a peak of 7.39 in Q4 2018. This indicates an improvement in the efficiency of collecting receivables during that timeframe. However, this peak is followed by a slight decline, with the ratio settling around 6.67 to 7.15 in the last periods of 2019. Overall, the turnover ratio appears relatively stable with mild cyclical variations, suggesting consistency in credit and collection policies.

Average Receivable Collection Period

The average collection period inversely mirrors the receivables turnover trend, fluctuating generally between 49 and 57 days. Early in the timeline, collection days hover between 54 and 57, reaching a high of 57 days at the end of 2015. A gradual improvement is then evident, with collection days reducing to as low as 49 in Q4 2018, indicative of a faster conversion of receivables to cash. However, the period slightly increases again toward the end of 2019, stabilizing around 51 to 55 days. This pattern reflects efficient credit management with some seasonal or operational variations impacting collection times.

Summary

In summary, both the receivables turnover and average collection period suggest a stable and effective receivables management process with modest improvements over time. The data shows a peak efficiency in late 2018, with collection periods shortening and turnover ratios peaking, followed by a slight normalization. These metrics portray the company's consistent ability to manage credit sales and collections effectively across the observed quarters.

The analysis of the quarterly financial data reveals distinct trends in the company's operational efficiency over the examined periods. Three key metrics are considered: the average inventory processing period, the average receivable collection period, and the overall operating cycle.

Average Inventory Processing Period

The average inventory processing period exhibited an increasing trend from early 2015 through to late 2016, rising from 350 days to a peak of 431 days in September 2016. This indicates that inventory was held longer before processing during this timeframe, potentially reflecting slower turnover. Following this peak, a gradual decline is observed from 2017 onwards, with a significant reduction noted towards the end of 2018 and into 2019, dropping to 263 days by September 2019. This downward movement suggests improvements in inventory management and faster turnover in more recent periods.

Average Receivable Collection Period

The average receivable collection period remained relatively stable throughout the period analyzed, fluctuating narrowly between 49 and 57 days. There is no clear trend of substantial increase or decrease; the slight variances do not signal significant changes in the company's receivables management practices. The consistency indicates steady efficiency in collecting receivables.

Operating Cycle

The operating cycle mirrored the inventory processing period trend, increasing from 404 days in March 2015 to a high of 489 days in June 2017. This longer cycle points to extended periods between purchasing inventory and receiving cash from sales. However, from mid-2017 onwards, there is a marked contraction in the operating cycle duration, reaching 314 days by September 2019. This reduction reflects enhanced operational efficiency and quicker conversion of inventory and receivables into cash.

Overall, the company experienced a period of lengthening inventory and operating cycles through 2016 and early 2017, which may have impacted liquidity negatively. Thereafter, improvements in inventory processing and operating cycle durations indicate more effective working capital management and potentially better cash flow dynamics. The stable receivable collection period throughout suggests that credit policies and customer payment behaviors remained consistent.

Payables Turnover

The payables turnover ratio demonstrates fluctuations over the analyzed periods without a clear sustained upward or downward trend. Initial values are around 1.98 in early 2015 and peak at 2.21 during the third quarter of 2015, then decline and stabilize near the range of 1.5 to 1.9 in subsequent quarters. The ratio reaches a notably low point of 1.4 in the fourth quarter of 2018, indicating a slower turnover during that period, before recovering somewhat by late 2019. This variation suggests irregularity in the company’s efficiency in paying suppliers, with certain periods exhibiting slower payment cycles.

Average Payables Payment Period

The average payables payment period, measured in days, inversely correlates with the payables turnover ratio and fluctuates significantly throughout the timeframe. Starting at 184 days in early 2015, the payment period decreases to 165 days by the third quarter of 2015 and then increases sharply to a peak of 260 days in the third quarter of 2018, indicating lengthening payment times. Post this peak, the period sees some reductions but remains elevated compared to the earliest periods, reaching as high as 245 days in the third quarter of 2019. The extension in average payment duration reflects a tendency toward slower payments to suppliers over time, especially in the latter years.

Overall Insights

The data suggest a pattern of increasing payment delays to suppliers as reflected by the rise in the average payables payment period and corresponding drop in payables turnover ratio at various intervals. Volatility in these metrics points to possible changes in the company’s working capital management or supplier payment policies. The peaks in deferred payment periods coincide with troughs in turnover ratios, underlining the inverse relationship between these two measures. The company appears to have periods of both accelerated and decelerated payment efficiency, signaling fluctuating liquidity or strategic supplier payment approaches during the analyzed timeframe.

Inventory Processing Period

The average inventory processing period demonstrated a fluctuating but generally downward trend over the analyzed timeframe. Initially, from early 2015 to late 2016, the days increased from 350 to a peak of 431, indicating a lengthening in inventory turnover time. However, from 2017 onward, the period gradually decreased, reaching 263 days by late 2019, suggesting improved inventory management and faster processing.

Receivable Collection Period

The average receivable collection period remained relatively stable throughout the periods examined. It fluctuated mildly around the mid-50s in days, showing no significant upward or downward trend. The period oscillated between 49 and 57 days, indicative of consistent collection efficiency without material changes in the accounts receivable turnover.

Payables Payment Period

The average payables payment period showed considerable variability during the period under review. Starting around 184 days in early 2015, it experienced fluctuations with upward movements to peaks such as 245 days towards the end of 2019. These variations suggest changes in the company's payment policies or negotiations with suppliers, sometimes extending the timeframe to settle payables.

Cash Conversion Cycle

The cash conversion cycle exhibited notable volatility. From approximately 220 days in early 2015, it rose to a high of 285 days in late 2016 before showing a marked decline starting in 2018. The cycle then decreased substantially, dropping to as low as 69 days by late 2019. This sharp reduction in the cash conversion cycle indicates a significant improvement in working capital efficiency, reflecting faster conversion of resources into cash inflows.