Gilead Sciences Inc. (NASDAQ:GILD)

The short-term operating activity ratios exhibit varied trends over the observed period. Inventory turnover generally decreased from 4.50 in March 2022 to a range between 3.33 and 3.66 from March 2023 through December 2024, with a slight increase to 3.51 in December 2025. Receivables turnover showed initial decline, followed by relative stability, and then a slight increase before decreasing again. Payables turnover experienced significant volatility, particularly a sharp drop in December 2022, followed by recovery and then another decline in late 2024 and early 2025. Working capital turnover demonstrated substantial fluctuation, with a particularly high value in June 2023, potentially indicating an anomaly or significant operational change. The period-based ratios show corresponding shifts in operational efficiency.

Inventory Management

The average inventory processing period generally increased from 81 days in March 2022 to 108 days in June 2025, suggesting a lengthening time to convert inventory into sales. This trend aligns with the decreasing inventory turnover ratio and could indicate challenges in inventory management or slowing sales.

Receivables Management

The average receivable collection period fluctuated between 51 and 65 days. While relatively stable for much of the period, it showed a slight upward trend, peaking at 65 days in September 2025, indicating a potential slowdown in collecting payments from customers. This corresponds with the fluctuations in receivables turnover.

Payables Management

The average payables payment period exhibited the most significant variation. A substantial increase to 58 days in December 2022 was followed by a return to around 30-40 days, before increasing again to 48 days in September 2025. This suggests changes in supplier credit terms or the company’s payment strategy. The volatility in payables turnover supports this observation.

Cash Conversion Cycle

The cash conversion cycle generally increased from 100 days in March 2022 to 124 days in December 2025. This increase is largely driven by the lengthening inventory processing period and, to a lesser extent, the receivable collection period. The increase suggests the company is taking longer to convert its investments in inventory and receivables into cash, potentially impacting liquidity.

Operating Cycle

The operating cycle followed a similar pattern to the cash conversion cycle, increasing from 132 days in March 2022 to 166 days in December 2025. This indicates a lengthening time between the initial outlay of cash to purchase inventory and the eventual collection of cash from sales.

The significant fluctuation in working capital turnover, particularly the spike in June 2023, warrants further investigation to understand the underlying cause. Overall, the trends suggest a gradual decrease in operational efficiency, as evidenced by the lengthening cash conversion cycle and inventory processing period. The volatility in payables management also requires attention to ensure optimal supplier relationships and financial flexibility.

Inventory turnover exhibited a fluctuating pattern over the observed period, spanning from March 31, 2022, to December 31, 2025. Initial values were relatively stable, followed by a period of decline, and then a degree of stabilization with some continued fluctuation.

Initial Period (Mar 31, 2022 – Jun 30, 2022)

The inventory turnover ratio remained constant at 4.50 during this period, indicating a consistent rate at which inventory was sold and replenished. This suggests stable demand and efficient inventory management during the first half of 2022.

Increase and Subsequent Decline (Sep 30, 2022 – Dec 31, 2022)

A slight increase to 4.71 was observed in September 2022, before declining to 3.75 by the end of the year. This decrease could be attributed to a buildup in inventory levels, potentially in anticipation of increased demand that did not fully materialize, or a slowdown in sales.

Continued Lower Values (Mar 31, 2023 – Jun 30, 2023)

The ratio continued to decrease, reaching 3.45 by June 30, 2023. This sustained decline suggests a continued trend of inventory accumulating relative to cost of goods sold. This could indicate weakening sales, increased inventory holding costs, or potential obsolescence concerns.

Fluctuation and Stabilization (Sep 30, 2023 – Dec 31, 2024)

From September 2023 through December 2024, the ratio fluctuated between 3.49 and 3.66. While not exhibiting a clear trend, these values remained below the initial levels observed in 2022. The slight increases during this period may indicate some success in managing inventory levels, but the overall turnover remained subdued.

Recent Period (Mar 31, 2025 – Dec 31, 2025)

The ratio experienced further fluctuation, ending at 3.51 in December 2025. The values of 3.55, 3.40, 3.47, and 3.51 suggest a continued lack of significant improvement in inventory turnover. The most recent values indicate a slight upward trend, but further monitoring is needed to confirm if this represents a sustained change.

Overall, the inventory turnover ratio demonstrates a general decline from the initial period, with a degree of stabilization and fluctuation in more recent quarters. The lower turnover rates observed in the later periods warrant further investigation to determine the underlying causes and potential implications for profitability and operational efficiency.

The receivables turnover ratio exhibits fluctuations over the observed period, generally indicating changes in the efficiency with which the company converts its receivables into cash. An initial downward trend is apparent from the first quarter of 2022 through the fourth quarter of 2022, followed by a period of relative stability and then further fluctuations through the end of the observed period.

Overall Trend

The ratio began at 7.18 in March 2022 and decreased to a low of 5.65 by December 2022. It then recovered to 6.43 by March 2023, remaining at that level through June 2023. Subsequent quarters show a decline to 5.60 in September 2025, before a slight increase to 5.89 in December 2025.

Short-Term Fluctuations (2022-2023)

The most significant decline occurred between March 2022 and December 2022. This suggests a lengthening of the collection period or a potential increase in outstanding receivables during that timeframe. The stabilization in the first half of 2023 indicates a potential correction or stabilization of collection practices.

Recent Performance (2024-2025)

From March 2024 through September 2025, the ratio demonstrates a more volatile pattern, oscillating between approximately 5.60 and 6.51. This suggests potential inconsistencies in the company’s credit and collection policies or variations in customer payment behavior. The slight increase in the final quarter observed suggests a potential improvement in receivables collection.

Relationship to Product Sales

While product sales generally increased over the period, the receivables turnover ratio did not consistently follow suit. This decoupling suggests that increases in sales were not always efficiently translated into cash receipts, potentially due to changes in credit terms offered to customers or shifts in the customer mix.

In conclusion, the receivables turnover ratio indicates a dynamic relationship between sales and cash collection. While there have been periods of stability, the overall trend suggests a need for continued monitoring of credit and collection policies to optimize the conversion of receivables into cash.

The accounts payable turnover ratio exhibits considerable fluctuation throughout the observed period, spanning from March 31, 2022, to December 31, 2025. An initial period of relative stability is followed by a significant decline and subsequent recovery, with ongoing variability thereafter.

Initial Stability & Subsequent Decline (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to June 30, 2022, the ratio demonstrates a slight increase, moving from 11.43 to 11.89. This is followed by a modest decrease to 11.22 by September 30, 2022. However, a substantial drop is observed in the final quarter of 2022, with the ratio falling to 6.25 by December 31, 2022. This represents the lowest point in the observed period and suggests a significant lengthening of the time taken to pay suppliers.

Recovery & Fluctuations (Mar 31, 2023 – Dec 31, 2024)

The first quarter of 2023 shows a recovery, with the ratio increasing to 8.99 by March 31, 2023, and continuing to 9.06 by June 30, 2023. The ratio then increases to 9.90 by September 30, 2023, and reaches a peak of 11.81 by December 31, 2023. This upward trend is followed by a decrease to 10.69 in the first quarter of 2024, then a substantial increase to 12.57 in the second quarter of 2024. A subsequent decline is noted, falling to 7.49 and 7.50 in the third and fourth quarters of 2024, respectively.

Recent Trend (Mar 31, 2025 – Dec 31, 2025)

The ratio experiences a moderate increase to 8.47 by March 31, 2025, followed by a decrease to 10.65 by June 30, 2025. A further decline is observed in the third quarter of 2025, reaching 7.66 by September 30, 2025. The period concludes with a slight increase to 8.72 by December 31, 2025. This suggests continued volatility in payment practices.

Cost of Goods Sold Consideration

The cost of goods sold generally increased over the period, particularly with a significant jump in the fourth quarter of 2022. While fluctuations in cost of goods sold are present, they do not directly correlate with all movements in the payables turnover ratio, suggesting factors beyond purchasing volume influence payment timing. The increase in cost of goods sold in the fourth quarter of 2022 may have contributed to the low payables turnover ratio observed during that period.

Overall, the accounts payable turnover ratio demonstrates a pattern of instability. While periods of improvement are evident, the ratio frequently fluctuates, indicating inconsistent supplier payment practices. The significant decline in late 2022 warrants further investigation to understand the underlying causes.

The working capital turnover ratio exhibits considerable fluctuation throughout the observed period. Initial values demonstrate a relatively stable range, followed by significant volatility and a subsequent return towards lower levels. A detailed examination of the trends reveals distinct phases in the company’s operational efficiency concerning working capital management.

Initial Stability & Increase (Mar 31, 2022 – Dec 31, 2022)

From March 31, 2022, to December 31, 2022, the working capital turnover ratio remained relatively consistent, ranging between 6.68 and 8.56. This suggests a stable relationship between sales and working capital during this period. A slight increase is observed over this timeframe, indicating a modest improvement in the efficiency of utilizing working capital to generate revenue.

Extreme Spike (Mar 31, 2023 – Jun 30, 2023)

A dramatic and anomalous increase in the ratio occurred in the first half of 2023, peaking at 84.15. This substantial rise is likely attributable to a significant decrease in working capital, coupled with relatively stable product sales. This suggests a substantial reduction in investments in current assets, potentially through aggressive inventory management or accelerated collection of receivables. The sustainability of this level is questionable without further investigation into the underlying causes.

Decline & Volatility (Sep 30, 2023 – Dec 31, 2024)

Following the peak, the ratio experienced a marked decline, fluctuating considerably between 5.61 and 26.58. This period is characterized by volatility, potentially reflecting changes in both working capital levels and product sales. The increase to 26.58 in March 2024 suggests a temporary improvement, but this was followed by a decline to 3.99 by December 2024. This suggests inconsistent operational efficiency.

Recent Trend (Mar 31, 2025 – Dec 31, 2025)

The most recent data points indicate a slight upward trend, with the ratio moving from 6.27 to 4.43. While showing some recovery, the values remain below the levels observed in the initial period of the analysis. This suggests that while the company is improving its working capital utilization, it has not yet returned to the efficiency levels seen earlier in the observed timeframe.

Overall, the working capital turnover ratio demonstrates a complex pattern. The initial stability, the extreme spike in the first half of 2023, and the subsequent volatility require further investigation to understand the underlying drivers and assess the long-term implications for the company’s operational performance.

The average inventory processing period exhibited fluctuations over the observed timeframe. Initially, the period remained stable before demonstrating a lengthening trend, followed by a period of relative stabilization and then a slight increase towards the end of the period.

Overall Trend

The average inventory processing period generally increased from 81 days in the first quarter of 2022 to approximately 104-108 days in the latter quarters of 2024 and 2025. This suggests a gradual slowdown in the rate at which inventory is sold and replenished.

Initial Stability (Q1 2022 - Q2 2022)

The average inventory processing period remained constant at 81 days for the first two quarters of 2022, indicating consistent inventory management practices during this period.

Lengthening Period (Q3 2022 - Q2 2023)

From the third quarter of 2022 through the second quarter of 2023, the average inventory processing period increased. It decreased slightly to 78 days in Q3 2022, then rose to 97 days in Q4 2022, and continued to climb to 106 days in Q2 2023. This suggests a potential increase in the time required to convert inventory into sales, possibly due to factors such as slower sales velocity or increased inventory levels.

Stabilization and Slight Increase (Q3 2023 - Q4 2025)

Following the peak of 106 days in Q2 2023, the average inventory processing period experienced a period of relative stabilization, fluctuating between 100 and 105 days for several quarters. However, a slight upward trend is observed in the final quarters, reaching 108 days in Q2 2025 and remaining at 104-105 days through the end of the observed period. This suggests a potential re-emergence of the factors contributing to the lengthening period observed earlier.

The inventory turnover ratio generally decreased over the period, which is consistent with the observed increase in the average inventory processing period. A lower turnover ratio indicates that inventory is being held for a longer duration.

The average receivable collection period exhibited fluctuations over the observed timeframe, spanning from March 31, 2022, to December 31, 2025. An initial upward trend is noted in the first half of the period, followed by a period of relative stability and then a final fluctuation. Overall, the period demonstrates a cyclical pattern.

Initial Trend (Mar 31, 2022 – Dec 31, 2022)

The average receivable collection period increased consistently from 51 days in March 2022 to 65 days by December 2022. This indicates a lengthening in the time taken to collect receivables during this period. This could be attributable to changes in credit terms offered to customers, a shift in the customer mix, or potential inefficiencies in the collection process.

Stabilization and Fluctuation (Mar 31, 2023 – Sep 30, 2024)

Following the increase, the collection period stabilized around the 56-64 day range for several quarters. There was a slight decrease to 56 days in December 2023, followed by a return to 59-62 days in the subsequent quarters. This suggests a potential correction or stabilization of collection practices after the initial lengthening. The fluctuations within this range are relatively minor.

Final Trend (Mar 31, 2025 – Dec 31, 2025)

The collection period increased to 61 days in June 2025, peaking at 65 days in September 2025, before decreasing to 62 days in December 2025. This final fluctuation suggests a potential re-emergence of the factors that contributed to the initial lengthening of the collection period, or a temporary disruption in the collection process. The decrease in the final quarter may indicate corrective actions or a return to more typical collection times.

Overall Observations

The average receivable collection period remained within a range of 51 to 65 days throughout the analyzed period. While there were periods of increase and stabilization, the overall trend does not indicate a drastic or sustained change in collection efficiency. The cyclical nature of the period suggests that external factors or internal policy adjustments may be influencing collection times.

The operating cycle, along with its component parts, exhibits discernible trends over the observed period. Generally, the operating cycle has lengthened, though with some quarterly fluctuations. A closer examination of the individual components reveals the drivers behind this overall trend.

Average Inventory Processing Period

The average inventory processing period demonstrates an increasing trend throughout the analyzed timeframe. Starting at 81 days in March 2022, it generally rose, peaking at 110 days in June 2024, before decreasing slightly to 104 days by December 2025. This suggests a potential slowdown in the efficiency of inventory management, possibly due to increased inventory levels, slower sales, or changes in supply chain dynamics. There is some quarterly volatility, but the overall direction is upward.

Average Receivable Collection Period

The average receivable collection period also shows an increasing trend, though less pronounced than that of the inventory processing period. Beginning at 51 days in March 2022, it increased to a high of 65 days in both September 2025 and June 2025. The period then decreased to 62 days by December 2025. This indicates a lengthening of the time required to collect payments from customers, potentially signaling changes in credit terms, customer payment behavior, or collection efforts. Similar to the inventory period, quarterly fluctuations are present, but the overall trend is upward.

Operating Cycle

The operating cycle, calculated as the sum of the inventory processing period and the receivable collection period, reflects the combined effect of the trends in its components. It increased from 132 days in March 2022 to 166 days in December 2025. The most significant increase occurred between March 2022 and December 2022, reaching 162 days, and then continued to climb, albeit at a slower rate, through September 2025. The slight decrease in the final quarter suggests a potential stabilization, but the overall trend remains upward. This lengthening operating cycle implies that the company is taking longer to convert its investments in inventory and receivables into cash.

In summary, the observed trends suggest a gradual decrease in the speed at which the company completes its operating cycle. Further investigation into the underlying causes of the increases in both the inventory processing period and the receivable collection period is warranted to identify potential areas for improvement in working capital management.

The average payables payment period exhibited fluctuations over the observed period, ranging from a low of 29 days to a high of 58 days. An initial period of relative stability is followed by a notable increase and subsequent moderation.

Overall Trend

From March 31, 2022, through June 30, 2023, the average payables payment period remained relatively consistent, fluctuating between 31 and 41 days. A significant increase to 49 days was then observed in the September and December quarters of 2023. The period then decreased to 34 days by March 31, 2024, before increasing again to 48 days by September 30, 2025, and concluding at 42 days on December 31, 2025.

Peak and Trough

The longest average payables payment period occurred in the final two quarters of 2023, reaching 49 days. The shortest period was observed in June 30, 2024, at 29 days.

Recent Performance

The most recent quarters show a slight upward trend in the average payables payment period. After reaching a low of 29 days in June 2024, the period increased to 48 days by September 30, 2025, and settled at 42 days by December 31, 2025. This suggests a potential lengthening of the time taken to settle obligations to suppliers in the latter part of the analyzed timeframe.

Volatility

The period demonstrates moderate volatility. While generally remaining within a range of 30 to 50 days, the observed swings, particularly in 2023 and 2025, indicate potential shifts in supplier relationships or payment strategies.

These fluctuations in the average payables payment period warrant further investigation to understand the underlying causes and potential implications for liquidity and supplier relations.

The short-term operating activity ratios indicate shifts in the company’s operational efficiency over the observed period. Specifically, the average inventory processing period, average receivable collection period, and average payables payment period, and their combined effect on the cash conversion cycle, demonstrate notable fluctuations.

Average Inventory Processing Period

The average inventory processing period generally increased from 81 days in March 2022 to a peak of 110 days in June 2024. Following this peak, the period decreased slightly to 108 days in September 2025 and 104 days in December 2025. This suggests a lengthening in the time required to convert inventory into sales, followed by a modest improvement in the most recent periods. The increase could be attributable to factors such as increased inventory levels, slower sales, or changes in inventory management practices.

Average Receivable Collection Period

The average receivable collection period exhibited an increasing trend from 51 days in March 2022 to 65 days in September 2025, before decreasing to 62 days in December 2025. This indicates a lengthening in the time taken to collect payments from customers, potentially signaling a weakening in credit control or changes in customer payment behavior. The recent slight decrease may indicate improved collection efforts.

Average Payables Payment Period

The average payables payment period showed considerable variability. It rose from 32 days in March 2022 to 58 days in December 2022, then decreased to 31 days in December 2023. It increased again to 49 days in September 2024 and remained at 49 days in December 2024, before decreasing to 34 days in March 2025 and increasing to 48 days in September 2025, and finally decreasing to 42 days in December 2025. This suggests fluctuating negotiation power with suppliers and/or deliberate changes in payment strategies.

Cash Conversion Cycle

The cash conversion cycle demonstrated a clear upward trend overall. Starting at 100 days in March 2022, it increased to 135 days in June 2025, with a peak of 143 days in June 2024. The cycle finished at 124 days in December 2025. This lengthening cycle indicates that the company is taking longer to convert its investments in inventory and other resources into cash. The increase is likely a combined effect of the increasing inventory and receivable periods, partially offset by fluctuations in the payables period. A longer cash conversion cycle generally implies a greater need for working capital financing and potentially reduced operational flexibility.

In summary, the observed trends suggest a gradual decline in operational efficiency as measured by the cash conversion cycle. While some recent periods show slight improvements, the overall trajectory indicates a need for careful monitoring and potential adjustments to inventory management, credit policies, and supplier negotiations.