DexCom Inc. (NASDAQ:DXCM)

Inventory Turnover

The inventory turnover ratio shows a declining trend from 5.2 in 2018 to a low of 2.15 in 2021, followed by a partial recovery to 3.35 in 2022. This indicates a decreasing efficiency in managing and selling inventory over the initial years, with some improvement in the most recent year.

Receivables Turnover

The receivables turnover ratio fluctuates without a clear trend, rising from 4.55 in 2018 to 5.16 in 2019, then decreasing to 4.5 in 2020, slightly increasing to 4.76 in 2021, and declining again to 4.08 in 2022. This irregular pattern suggests variability in the collection of receivables, with a slight weakening in 2022.

Payables Turnover

Payables turnover increased from 4.87 in 2018 to 5.32 in 2019, then declined to about 3.92 in 2021 before rising again to 4.32 in 2022. This indicates a period of slower payment to suppliers followed by some acceleration in payments by 2022.

Working Capital Turnover

Working capital turnover shows an overall upward trend, starting at 0.7 in 2018, dipping to 0.69 in 2020, then steadily increasing to 0.83 in 2021 and significantly rising to 1.59 in 2022. This reflects improved efficiency in generating sales from working capital, especially marked in 2022.

Average Inventory Processing Period

The average inventory processing period increases markedly from 70 days in 2018 to 170 days in 2021, indicating slower inventory turnover, before decreasing to 109 days in 2022, which suggests an improvement in inventory management during the last year.

Average Receivable Collection Period

This period decreases from 80 days in 2018 to 71 days in 2019, then varies around the 77 to 89 days range through 2022, ending higher at 89 days. The increase in 2022 suggests customers are taking longer to pay, potentially impacting cash flows negatively.

Operating Cycle

The operating cycle steadily lengthens from 150 days in 2018 to 247 days in 2021, indicating extended time to convert inventory and receivables into cash. It improves slightly in 2022 by decreasing to 198 days, though it remains elevated compared to earlier years.

Average Payables Payment Period

This metric decreases initially from 75 days in 2018 to 69 days in 2019, then increases to 93 days in 2021, reflecting a tendency to delay payments to suppliers over this period. It shortens in 2022 to 85 days, indicating somewhat faster payments relative to prior years.

Cash Conversion Cycle

The cash conversion cycle increases from 75 days in 2018 to 154 days in 2021, indicating that the time taken to convert investments in inventory and other resources into cash has more than doubled in this period. In 2022, it decreases to 113 days, showing some improvement but still pointing to a relatively long cash conversion timeframe.

Cost of Sales

The cost of sales increased consistently over the five-year period, rising from 367,700 thousand US dollars in 2018 to 1,026,700 thousand US dollars in 2022. This represents a near threefold increase, indicating a substantial growth in expenses directly associated with the production of goods or services sold. The year-over-year increments suggest expanding operations or increased production costs.

Inventory

Inventory levels showed an upward trend from 70,700 thousand US dollars in 2018 to a peak of 357,300 thousand US dollars in 2021, followed by a decline to 306,700 thousand US dollars in 2022. The initial increase in inventory suggests stockpiling or increased procurement, possibly to meet growing demand or due to supply chain considerations. The reduction in 2022 might indicate improved inventory management or adjustments to sales forecasts.

Inventory Turnover

Inventory turnover ratios declined from 5.2 in 2018 to a low of 2.15 in 2021, showing a trend of slower inventory movement relative to sales. However, there was a partial recovery to 3.35 in 2022. The decreasing turnover ratio through 2021 implies an accumulation of inventory or slowed sales relative to stock, which could increase holding costs and risk of obsolescence. The improvement in 2022 suggests better efficiency in inventory management or stronger sales performance relative to inventory levels.

The financial data reveals several notable trends over the five-year period.

Revenue

There is a consistent and substantial increase in revenue year-over-year. Revenue grew from approximately 1,031.6 million USD in 2018 to 2,909.8 million USD in 2022. This reflects a strong upward trajectory, with the revenue nearly tripling over the period, indicating robust sales growth and expansion of business activities.

Accounts Receivable, Net

The net accounts receivable also show a marked increase across the same timeframe. Starting at 226.7 million USD in 2018, it expanded more than threefold to 713.3 million USD in 2022. This rising trend is consistent with the revenue growth but suggests that the company is allowing more sales on credit or facing longer collection times as the receivables balance grows substantially.

Receivables Turnover Ratio

The receivables turnover ratio fluctuates somewhat across the years but follows a downward trend overall. It increased from 4.55 in 2018 to a peak of 5.16 in 2019, then progressively declined to 4.08 by 2022. A declining turnover ratio along with increasing receivables suggests that the company may be experiencing longer collection periods or potential challenges in efficiently converting receivables into cash despite higher revenues.

In summary, the company demonstrates strong revenue growth accompanied by a substantial rise in accounts receivable, but the decreasing receivables turnover ratio may warrant further investigation into credit policies and collections management to ensure working capital efficiency.

The financial data reveals several notable trends over the five-year period ending in 2022. Cost of sales experienced a consistent upward trajectory, increasing from 367.7 million US dollars in 2018 to approximately 1.027 billion US dollars in 2022. This trend indicates a significant rise in the cost incurred by the company to produce goods or services over the years.

Accounts payable trade also rose steadily, moving from 75.5 million US dollars in 2018 to 237.9 million US dollars in 2022. This increase aligns with the growth in cost of sales, suggesting a higher volume of credit purchases or extended payment terms with suppliers.

The payables turnover ratio, which reflects the rate at which the company pays off its suppliers, showed some variability. It started at 4.87 in 2018 and peaked at 5.32 in 2019, indicating faster payments during that year. However, the ratio decreased notably in 2020 to 3.96 and remained relatively stable around 3.9 in 2021, before increasing again to 4.32 in 2022. This fluctuation suggests changes in payment efficiency or credit terms, with the company possibly delaying payments in 2020 and 2021 before improving in 2022.

Cost of Sales

Consistently increased each year, more than doubling over the five-year period.

Accounts Payable Trade

Increased in tandem with cost of sales, indicating higher liabilities towards suppliers.

Payables Turnover Ratio

Varied between 3.9 and 5.3, reflecting fluctuating payment speed to suppliers, with a dip in 2020-2021 and a recovery in 2022.

Overall, the data suggests that as the company expanded its operations or sales volume, its costs and trade payables grew accordingly. The changes in payables turnover ratio indicate some variability in payment practices, potentially reflecting strategic adjustments in cash flow management or supplier negotiations during the observed period.

Revenue

Revenue exhibited a consistent upward trajectory over the observed five-year period. Starting at approximately 1.03 billion USD in 2018, it increased each year, reaching nearly 2.91 billion USD by the end of 2022. This demonstrates a strong, sustained growth trend in the company's sales or service income.

Working Capital

Working capital also showed a general increasing trend from 2018 through 2021, rising from about 1.48 billion USD to nearly 3 billion USD. However, in 2022, working capital decreased significantly to around 1.83 billion USD. This notable decline after several years of growth could suggest changes in the company's short-term financial management or operational working capital requirements during that year.

Working Capital Turnover

The working capital turnover ratio, which reflects the efficiency with which the company generates revenue from its working capital, showed some variability. Initially, it increased from 0.7 in 2018 to 0.92 in 2019, indicating improved efficiency. However, it then declined to 0.69 in 2020 before recovering to 0.83 in 2021. In 2022, there was a substantial increase to 1.59, the highest ratio in the period observed. This sharp rise suggests a significant improvement in the utilization of working capital to generate revenue during the last year.

Interrelations and Insights

The increase in revenue combined with the fluctuating working capital and turnover ratio points to changing operational dynamics. The decrease in working capital in 2022 coupled with the highest working capital turnover ratio indicates that the company was more effective in utilizing its available short-term resources to support revenue generation. Prior to that, the combination of rising working capital and moderate turnover ratios implies that the company might have held more liquid assets relative to its sales, reducing turnover efficiency. Overall, the data reflect a company that has grown its revenue markedly while showing varying strategies or results in managing the efficiency of its working capital.

Inventory Turnover

The inventory turnover ratio demonstrates a clear downward trend from 2018 through 2021, decreasing from 5.2 to 2.15. This indicates a slower rate of inventory being sold and replenished over that period. However, in 2022, the ratio shows a partial recovery, rising to 3.35, suggesting an improvement in the efficiency of inventory management or sales velocity compared to the previous year.

Average Inventory Processing Period

The average inventory processing period exhibits an inverse pattern to the inventory turnover ratio. It increases progressively from 70 days in 2018 to a peak of 170 days in 2021, implying a lengthening duration for inventory to be converted into sales. In 2022, this period decreases significantly to 109 days, indicating a shorter holding time for inventory and potentially a more efficient inventory cycle relative to 2021.

Overall Analysis

The data reveals a period of declining inventory efficiency and increasing inventory holding times from 2018 to 2021. The partial reversal in 2022 suggests efforts to enhance inventory turnover and reduce inventory days on hand, which may reflect improved sales performance, supply chain management, or inventory control measures implemented in that year. This pattern highlights the company's fluctuating operational efficiency in managing inventory over the observed periods.

Receivables Turnover

The receivables turnover ratio exhibited variability over the five-year period. It increased from 4.55 in 2018 to a peak of 5.16 in 2019, indicating enhanced efficiency in collecting receivables during that year. However, this was followed by a decline to 4.5 in 2020, suggesting a slowdown in collection. A moderate recovery is observed in 2021 with a ratio of 4.76, but this was again followed by a decrease to 4.08 in 2022, marking the lowest point in the period analyzed. Overall, the trend reflects fluctuating efficiency in receivables management, with 2022 showing a weakening in collection performance compared to earlier years.

Average Receivable Collection Period

The average receivable collection period, measured in days, shows an inverse relationship to the receivables turnover trend. Beginning at 80 days in 2018, the period shortened to 71 days in 2019, consistent with improved turnover in that year. Subsequently, the collection period extended to 81 days in 2020, reflecting a slower receivables conversion into cash. A slight improvement is noted in 2021 with the period decreasing to 77 days, but this was followed by a significant increase to 89 days in 2022, indicating the longest duration to collect receivables during the period in question. This suggests that the company's customers took longer to settle their accounts in the most recent year, potentially impacting liquidity.

Overall Insights

The analysis of both indicators reveals a general pattern where improvements in receivables turnover correspond with reductions in collection days, and vice versa. The peak efficiency in 2019 is notable, followed by a deterioration trend culminating in 2022. The extension of the average collection period and the decline in turnover in 2022 could imply challenges in credit management or changing customer payment behavior, which may warrant further investigation to mitigate potential cash flow pressures.

The analysis of the presented financial data reveals notable trends in DexCom Inc.'s inventory management and receivable collection efficiencies over the five-year period from 2018 to 2022.

Average inventory processing period

This metric shows a significant increase from 70 days in 2018 to a peak of 170 days in 2021, followed by a notable reduction to 109 days in 2022. The sharp rise between 2019 and 2021 suggests increasing challenges or strategic shifts in inventory turnover. The subsequent decrease in 2022 could indicate improvements in inventory management or changes in operational practices.

Average receivable collection period

The receivable collection period fluctuates moderately throughout the period. There is a decrease from 80 days in 2018 to 71 days in 2019, suggesting improved collection efficiency. However, it increases again in subsequent years, reaching 89 days in 2022, which may reflect slower customer payments or credit policy adjustments.

Operating cycle

The operating cycle, combining both inventory and receivables periods, increases from 150 days in 2018 to a high of 247 days in 2021. This expansion aligns with the rising inventory processing period, indicating a lengthening of the time taken to convert resources into cash. The reduction to 198 days in 2022 suggests some operational improvement but remains elevated relative to the earlier years.

Overall, the data indicates a period of operational strain or strategic shifts resulting in longer inventory holding and collection periods, particularly peaking in 2021, followed by partial recovery in 2022. The lengthening of the operating cycle over most years implies increased capital tied up in working capital, which may affect liquidity and operational efficiency.

Payables Turnover

The payables turnover ratio exhibited fluctuations over the five-year period. Initially, it increased from 4.87 in 2018 to 5.32 in 2019, indicating a faster rate of paying off payables. However, a decline occurred in the subsequent years, dropping to 3.96 in 2020 and slightly decreasing further to 3.92 in 2021. In 2022, the ratio rose again to 4.32, suggesting a partial recovery towards a quicker payables payment cycle.

Average Payables Payment Period

The average number of days taken to pay suppliers showed an inverse pattern to the payables turnover ratio. From 2018 to 2019, the payment period shortened from 75 days to 69 days, aligning with the increased turnover ratio. Subsequently, there was a significant increase in the payment period to 92 days in 2020, which further extended slightly to 93 days in 2021. In 2022, the period decreased to 85 days, indicating some improvement but still a longer payment duration compared to the initial years.

Overall Insight

The trends suggest that after an initial improvement in payable management between 2018 and 2019, the company experienced a slowdown in payments through 2020 and 2021. Despite a partial reversal in 2022, the average payment period remained higher than in the earliest years. This pattern may reflect changes in working capital management, supplier negotiations, or cash flow strategies over time.

Average Inventory Processing Period

The average inventory processing period showed an overall increasing trend from 2018 to 2021, rising from 70 days to a peak of 170 days. However, in 2022, there was a notable reduction to 109 days, indicating some improvement in inventory management efficiency after several years of lengthening turnover times.

Average Receivable Collection Period

The receivable collection period fluctuated modestly throughout the period. It began at 80 days in 2018, decreased to 71 days in 2019, then increased again reaching 89 days by 2022. This suggests some inconsistency in the efficiency of collecting outstanding receivables, with the latest figure indicating a slower collection pace relative to earlier years.

Average Payables Payment Period

The payables payment period varied over the years, initially decreasing from 75 days in 2018 to 69 days in 2019, followed by a significant increase to 92 days in 2020 and remaining high near 93 days in 2021 before slightly decreasing to 85 days in 2022. This pattern reflects a strategic extension of payment terms in the middle years, followed by a partial repayment acceleration.

Cash Conversion Cycle

The cash conversion cycle demonstrated a clear upward trend from 75 days in 2018 to a peak of 154 days in 2021, indicating a lengthening time for converting investments in inventory and other resources into cash flows. In 2022, the cycle shortened to 113 days, suggesting an improvement in working capital management but still elevated compared to the initial period.