Gilead Sciences Inc. (NASDAQ:GILD)

The analyzed data indicates several meaningful trends in the company's operational efficiency and working capital management over the five-year period.

Inventory Turnover

The inventory turnover ratio improved significantly from 2.72 in 2020 to a peak of 4.08 in 2021, suggesting enhanced inventory management or faster sales. However, it declined gradually thereafter to stabilize around 3.64-3.66 in 2023 and 2024, indicating a slight easing in inventory movement.

Receivables Turnover

This ratio showed an overall upward trajectory, increasing from 4.98 in 2020 to 6.47 in 2024. This improvement suggests the company has been more effective in collecting receivables more quickly over time, although a minor dip in 2022 indicates some temporary slowdown.

Payables Turnover

The payables turnover ratio exhibited substantial volatility. It rose sharply from 5.42 in 2020 to 9.36 in 2021, fell to 6.25 in 2022, surged again to 11.81 in 2023, then declined to 7.5 in 2024. These fluctuations imply varying strategies or conditions affecting payment timing, with periods of quicker payments interspersed with slower payment intervals.

Working Capital Turnover

The working capital turnover ratio increased strongly from 5.3 in 2020 to 8.54 in 2021 and stayed near that level in 2022, before falling considerably to 5.61 in 2023 and further to 3.99 in 2024. This decline could indicate reduced efficiency in generating sales relative to working capital invested, possibly due to increased capital demands or slower sales growth.

Average Inventory Processing Period

The average time to process inventory shortened significantly from 134 days in 2020 to 89 days in 2021, reflecting improved inventory management. It then increased slightly to a fairly stable period around 97-100 days in subsequent years, indicating a plateau in processing speed.

Average Receivable Collection Period

This measure decreased steadily from 73 days in 2020 to 56 days in 2024, supporting the observed increase in receivables turnover and reinforcing that collection efficiency has improved over time.

Operating Cycle

The operating cycle shortened markedly from 207 days in 2020 to 150 days in 2021 and remained relatively stable around 156-163 days thereafter. This suggests the company succeeded in reducing the total duration from inventory acquisition to cash collection, enhancing operational cash flow timing.

Average Payables Payment Period

The payment period shortened sharply from 67 days in 2020 to 31 days in 2023, indicating faster payment to suppliers, before lengthening again to 49 days in 2024. This could reflect strategic adjustments balancing cash outflows and supplier relationships.

Cash Conversion Cycle

The cash conversion cycle improved from 140 days in 2020 down to 104 days in 2022, signaling enhanced cash flow efficiency. However, it increased to 132 days in 2023 before decreasing again to 107 days in 2024, indicating some fluctuations in working capital effectiveness but generally better than earlier years.

Overall, the data reveals improvements in receivables management and inventory processing efficiency, leading to a generally shorter operating cycle and cash conversion cycle. However, payables turnover and working capital turnover show irregular trends, suggesting variable supplier payment policies and working capital usage that may warrant further examination. The company appears to have optimized its cash flow cycles compared to 2020, despite some recent volatility.

Cost of Goods Sold

Over the analyzed five-year period, the cost of goods sold (COGS) displayed a fluctuating pattern. Starting at 4,572 million US dollars in 2020, it rose significantly to 6,601 million in 2021, followed by a decrease to 5,657 million in 2022. It increased again to 6,498 million in 2023, then slightly decreased to 6,251 million in 2024. This volatility suggests variability in production or procurement costs potentially influenced by external market factors or internal operational changes.

Inventories

Inventory levels showed a general downward trend with some variability. Beginning at 1,683 million US dollars in 2020, inventories marginally declined to 1,618 million in 2021 and continued to 1,507 million in 2022. A reversal occurred in 2023 with an increase to 1,787 million, followed by a slight decrease to 1,710 million in 2024. This overall reduction, punctuated by the 2023 uptick, may indicate efforts toward inventory optimization or changes in demand forecasting.

Inventory Turnover Ratio

The inventory turnover ratio demonstrated a sizeable improvement from 2020 to 2021, increasing from 2.72 to 4.08, signaling faster inventory movement and potentially enhanced efficiency in inventory management. Afterwards, this ratio slightly declined to 3.75 in 2022 and remained relatively stable around 3.64 and 3.66 in 2023 and 2024, respectively. The peak in 2021 followed by a moderate decline suggests that while inventory efficiency improved significantly early in the period, it stabilized at a lower yet steady level subsequently.

The financial data reveals distinct trends in product sales, accounts receivable, and receivables turnover for the company over the five-year period from 2020 to 2024.

Product Sales

Product sales demonstrated an overall upward trajectory, increasing from $24,355 million in 2020 to $28,610 million in 2024. The growth was more pronounced between 2020 and 2021, with a notable jump from $24,355 million to $27,008 million. Sales stabilized during 2022 and 2023, showing minor fluctuations around the $26,900 million mark. By 2024, sales recovered and reached their highest level over the period analyzed.

Accounts Receivable, Net

Accounts receivable decreased from $4,892 million in 2020 to $4,420 million in 2024. The most significant reduction occurred between 2020 and 2021, where receivables declined by approximately $400 million. The subsequent years saw minor variations, with a slight increase in 2022 and small declines thereafter. This decreasing trend suggests improved collection or credit policies over time.

Receivables Turnover

Receivables turnover, which measures the efficiency of collecting receivables, improved steadily from 4.98 in 2020 to 6.47 in 2024. The ratio spike in 2021 to 6.01 highlights enhanced collection performance or reduced receivables relative to sales. Following a slight dip in 2022, efficiency continued to improve through 2023 and 2024, reaching the highest turnover ratio in the period analyzed. This indicates faster conversion of receivables into cash, consistent with the downward trend in accounts receivable.

Overall, the analysis suggests that the company has experienced stable revenue growth while simultaneously enhancing its credit management and collection processes. The rising receivables turnover alongside decreasing accounts receivable, despite increasing sales, indicate an effective balance between sales expansion and receivables management.

The financial data indicates fluctuating patterns in key expense and liability metrics over the five-year period.

Cost of Goods Sold (COGS)

COGS exhibited variability with an initial increase from 4572 million USD in 2020 to a peak of 6601 million USD in 2021. Subsequently, it declined to 5657 million USD in 2022, rose again in 2023 to 6498 million USD, and then decreased slightly to 6251 million USD in 2024. The oscillations suggest variable production or procurement costs possibly influenced by operational factors or market conditions.

Accounts Payable

Accounts payable showed decreases and increases without a clear upward or downward trend. Starting at 844 million USD in 2020, it decreased to 705 million USD in 2021, increased to a high of 905 million USD in 2022, dropped sharply to 550 million USD in 2023, and then rose again to 833 million USD in 2024. This fluctuation may reflect changes in payment policies, supplier terms, or purchasing volumes.

Payables Turnover Ratio

The payables turnover ratio demonstrated considerable volatility. It increased significantly from 5.42 in 2020 to 9.36 in 2021, decreased to 6.25 in 2022, surged to a high of 11.81 in 2023, and then fell to 7.5 in 2024. Higher turnover ratios indicate faster payment to suppliers, whereas lower ratios imply slower payment cycles. The sharp increases followed by declines suggest inconsistent payment tempo or changes in managing supplier obligations over the periods.

Working Capital

The working capital exhibited a fluctuating trend over the observed periods. Beginning at 4,599 million US dollars in 2020, it decreased significantly to 3,162 million in 2021 and showed a marginal increase to 3,206 million in 2022. In the subsequent years, the working capital grew noticeably, reaching 4,805 million in 2023 and further increasing to 7,169 million in 2024, marking a substantial overall growth from 2020 to 2024.

Product Sales

Product sales demonstrated a generally stable to moderately increasing trend. Sales rose from 24,355 million US dollars in 2020 to 27,008 million in 2021, remained almost flat at 26,982 million in 2022, and slightly declined to 26,934 million in 2023. However, there was a recovery with an increase to 28,610 million in 2024. Overall, product sales have shown resilience with minor fluctuations, culminating in a moderate growth over the five-year period.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently the company utilizes its working capital to generate sales, exhibited a decreasing trend after an initial peak. It increased from 5.3 in 2020 to a peak of 8.54 in 2021, indicating improved efficiency. Afterwards, it slightly decreased to 8.42 in 2022, followed by a sharper decline to 5.61 in 2023 and further to 3.99 in 2024. This decline suggests that despite growing working capital levels, the rate at which working capital is being converted into product sales has diminished significantly in the later years.

Overall Insights

The data reveals that while the company has substantially increased its working capital by 2024, product sales have experienced relatively modest changes. The increasing working capital, paired with a declining turnover ratio, may indicate less efficient use of current assets in generating sales. This could suggest a more conservative financial stance or potential overcapitalization in working assets. Further analysis could explore the underlying causes, such as inventory buildup, changes in accounts receivable, or other current asset and liability components affecting working capital.

Inventory Turnover

The inventory turnover ratio demonstrates an overall upward trend from 2020 through 2021, increasing significantly from 2.72 to 4.08. This suggests an improvement in the efficiency of inventory management during that period. However, subsequent years reflect a slight decline and stabilization, with turnover ratios of 3.75, 3.64, and 3.66 for 2022, 2023, and 2024 respectively. The decrease after 2021 indicates a modest reduction in the speed of inventory movement but remains substantially higher than the initial 2020 figure.

Average Inventory Processing Period

The average number of days inventory is held before processing inversely correlates with the inventory turnover ratio. It decreases sharply from 134 days in 2020 to 89 days in 2021, consistent with the increased turnover ratio observed. Following this sharp decline, the processing period slightly rises and stabilizes around 97 to 100 days from 2022 through 2024. This plateau suggests a consistent inventory holding period during these years.

Summary of Trends

The data indicates a marked improvement in inventory management efficiency between 2020 and 2021, as evidenced by a notable increase in inventory turnover and a simultaneous reduction in the average inventory processing period. After this improvement, the efficiency metrics show stabilization with minor regression but remain better compared to the 2020 baseline. This suggests that the company has maintained relatively consistent inventory handling practices over the latter years after achieving initial gains in operational efficiency.

Receivables Turnover

The receivables turnover ratio shows an overall upward trend from 2020 through 2024, increasing from 4.98 to 6.47. This indicates an improvement in the efficiency of collecting receivables over the analyzed period. The ratio experienced a significant increase from 2020 to 2021, rising to 6.01, followed by a slight decline to 5.65 in 2022. Subsequently, the ratio gradually recovered, reaching 5.78 in 2023 and then rising further to 6.47 in 2024. Such trends suggest the company has generally enhanced its ability to convert receivables into cash, with minor fluctuations in the middle years.

Average Receivable Collection Period

The average receivable collection period, expressed in days, exhibits a declining trend over the five-year span, decreasing from 73 days in 2020 to 56 days in 2024. This reduction corresponds inversely to the increase in the receivables turnover ratio, confirming faster recovery of receivables. After an initial sharp decline from 73 days to 61 days between 2020 and 2021, there was a slight increase to 65 days in 2022, indicating a temporary elongation in collection time. However, the period shortened again in the following years, reaching 63 days in 2023 and further decreasing to 56 days in 2024. The overall trend reflects an improvement in the company's credit and collection policies or better customer payment behavior.

Average Inventory Processing Period

The average inventory processing period showed a significant decline from 134 days in 2020 to 89 days in 2021, indicating improved efficiency in inventory turnover. This was followed by a moderate increase to 97 days in 2022, with a slight rise to 100 days maintained in both 2023 and 2024, suggesting stabilization in inventory management after initial improvements.

Average Receivable Collection Period

The average receivable collection period exhibited a consistent downward trend from 73 days in 2020 to 56 days in 2024. Despite minor fluctuations in 2022 and 2023, the overall decrease implies enhanced effectiveness in collecting receivables, which might positively impact cash flow.

Operating Cycle

The operating cycle declined markedly from 207 days in 2020 to 150 days in 2021, reflecting gains in operational efficiency. Subsequently, it experienced a slight upward trend to 163 days in 2022 and 2023, before decreasing again to 156 days in 2024. This pattern aligns with changes in both inventory processing and receivables collection, indicating the company's focus on optimizing working capital management.

Payables Turnover

The payables turnover ratio exhibited considerable fluctuations over the five-year period. Beginning at 5.42 in 2020, the ratio increased sharply to 9.36 in 2021, suggesting an improvement in the company's efficiency in managing payables and settling obligations more quickly. In 2022, the ratio declined to 6.25, indicating a temporary deceleration in turnover speed. This was followed by a significant rise to 11.81 in 2023, the highest level in the observed period, before decreasing to 7.5 in 2024. The overall pattern reflects volatility in payables management, with alternating periods of faster and slower turnover.

Average Payables Payment Period

The average payables payment period in days displayed a pattern inverse to the turnover ratio, consistent with expectations. Starting at 67 days in 2020, there was a substantial reduction to 39 days in 2021, implying that the company was paying its suppliers more promptly. The payment period then lengthened to 58 days in 2022, suggesting a slower payment cycle. This was followed by a further decrease to 31 days in 2023, the shortest period in the dataset, indicating a notably accelerated payment process. In 2024, the period lengthened again to 49 days, signaling a moderate extension in payment terms or timing compared to the previous year.

Overall Insights

The data reveal a cyclical pattern in the company’s payables management, alternating between periods of accelerated payments and longer payment cycles. These shifts may reflect strategic adjustments, negotiations with suppliers, or changes in liquidity management practices. The pronounced peaks and troughs in both the payables turnover ratio and the average payment period highlight the company’s dynamic approach to supplier payments over the examined timeframe.

Average Inventory Processing Period

The average inventory processing period exhibited a notable decline from 134 days in 2020 to 89 days in 2021, indicating improved inventory turnover efficiency. However, it slightly increased in subsequent years to 97 days in 2022 and stabilized around 100 days in 2023 and 2024. This suggests some challenges in further reducing inventory holding times after the initial improvement.

Average Receivable Collection Period

There was a steady decrease in the average receivable collection period from 73 days in 2020 to 56 days by 2024. This trend reflects enhanced effectiveness in credit and collections management, leading to faster cash inflows from receivables over the five-year period.

Average Payables Payment Period

The average payables payment period showed considerable fluctuations. It dropped sharply from 67 days in 2020 to 39 days in 2021, indicating quicker payment to suppliers. Following this, it rose to 58 days in 2022, then decreased again to 31 days in 2023 before rising to 49 days in 2024. These variations may reflect changing supplier payment strategies or shifts in working capital management policies.

Cash Conversion Cycle

The cash conversion cycle improved significantly from 140 days in 2020 to 111 days in 2021, signaling better overall working capital management. It continued to decline to 104 days in 2022 but then increased to 132 days in 2023, before dropping again to 107 days in 2024. This volatility suggests intermittent challenges in synchronizing inventory, receivables, and payables management, impacting the company's cash flow efficiency.