Illumina Inc. (NASDAQ:ILMN)

Inventory Turnover

The inventory turnover ratio showed a slight upward trend over the period analyzed, beginning at 2.63 and gradually increasing to 3.28 by the last quarter. Notably, a dip occurred in mid-2020 to around 2.29 before recovering strongly in 2021, indicating improved efficiency in inventory management toward the end of the timeframe.

Receivables Turnover

Receivables turnover exhibited fluctuations but generally maintained moderate stability across the quarters. The ratio increased from 6.59 to peaks around 8.7 during the middle of 2020, suggesting episodes of faster collection during this period. However, it returned to approximate levels of 7.09 by late 2021, reflecting relatively consistent credit collection performance.

Payables Turnover

The payables turnover ratio showed considerable volatility with values ranging roughly between 4.79 and 8.11. There was a notable spike around early 2020, indicating quicker payment to suppliers, but this was followed by a decline to 5.3 by the last recorded quarter. This pattern suggests variable supplier payment policies, possibly adapting to cash flow conditions.

Working Capital Turnover

This ratio began at 1.35 and generally declined over time, reaching a low near 0.79 in early 2021. However, a substantial jump to 2.78 occurred at the end of the period, signaling a significant improvement in the efficiency with which working capital is used to generate sales. The prior decline and recovery hint at changing operational efficiency and possibly improved working capital management at the end.

Average Inventory Processing Period

The days inventory was held fluctuated around the low to mid-130s, peaking at 160 days during mid-2020, indicating slower inventory turnover during that time. A consistent decline followed, reaching 111 days by late 2021, reflecting faster inventory processing and turnover in the latter part of the timeframe.

Average Receivable Collection Period

The collection period varied from the mid-40s to upper 50s in days, with the shortest periods observed during mid-2020 (around 42 days) and longer durations before and after. This suggests intermittent improvements in credit management and collection efficiency.

Operating Cycle

The operating cycle remained relatively steady, fluctuating mostly between 161 and 203 days. Longer cycles coincided with mid-2020, consistent with delayed inventory processing and receivables collection, followed by shortening towards the end of the period, indicative of improving operational efficiency.

Average Payables Payment Period

Payments to suppliers showed variability with days payable ranging from 45 to 76. There was a tendency toward shorter payment periods during 2018-2019, extending to higher values around 68-69 days by late 2021, suggesting a shift toward longer payment terms possibly to manage cash flows.

Cash Conversion Cycle

The cash conversion cycle experienced peaks near 152 days in mid-2020, denoting longer intervals between cash outlay and inflow, likely due to inventory and receivables delays. Subsequently, the cycle shortened notably to 94 days by late 2021, highlighting improvements in the company’s overall liquidity management and operational cash flow efficiency.

The analysis of the quarterly financial data reveals several notable trends in the cost of revenue, inventory levels, and inventory turnover ratios over the specified periods.

Cost of Revenue

The cost of revenue demonstrates a fluctuating upward trend throughout the periods. Initially, it hovers around the low to mid-230 million USD range during 2017, then gradually increases with some variability into 2018 and 2019. A pronounced rise appears from late 2019 through 2021, peaking in the range of approximately 320 to 340 million USD by late 2021. This suggests increasing expenses related to producing goods or services, which may be influenced by factors such as higher production volumes, changes in input costs, or operational scaling.

Inventory

Inventory levels show a steady increase from 2017 through early 2020, rising from just under 300 million USD to above 435 million USD at one point. However, there is a noticeable dip in mid to late 2020, dropping to approximately 372 million USD. Following this decline, inventory gradually recovers, reaching around 380 to 400 million USD by late 2021. This pattern indicates careful inventory management responding to changing demand or supply chain considerations, with a temporary reduction possibly due to strategic adjustments or external disruptions.

Inventory Turnover Ratio

The inventory turnover ratio starts between 2.6 and 2.8 in 2017 and remains relatively stable with minor fluctuations until early 2019. Notably, there is a spike to 3.0 towards the end of 2019, followed by a decline to around 2.3 in mid-2020, corresponding with the period of reduced inventory levels. From mid-2020 onwards, the ratio exhibits a rising trend, peaking at approximately 3.28 by late 2021. This increasing turnover rate suggests improved efficiency in inventory management and sales, indicating the company is moving inventory faster relative to its average inventory held.

Overall, the financial indicators portray a company experiencing growing operational scale, reflected in rising cost of revenue and inventory. The fluctuations in inventory levels, coupled with the evolving turnover ratio, imply responsive adjustments to market or internal conditions, with recent trends pointing toward enhanced inventory efficiency.

The quarterly financial data reveals several notable trends and observations regarding revenue, accounts receivable, and receivables turnover over the analyzed periods.

Revenue Trends

The revenue figures demonstrate a generally positive upward trajectory over the period under review. Starting at $598 million, revenue steadily increased, peaking at $1,126 million by the third quarter of 2021. Notable fluctuations occurred around mid-2020 with a dip to $633 million, possibly reflecting external disruptions, followed by a strong recovery and subsequent growth. Overall, the data reflect sustained revenue growth with some short-term volatility.

Accounts Receivable Behavior

Accounts receivable exhibited a gradual increase from $368 million to $604 million through the analyzed period. Periods of sharper increases were observed towards the end of 2018 and from late 2019 to early 2020, consistent with the revenue increases but also reflecting greater credit extended to customers. This rise in receivables may suggest longer collection periods or changes in sales terms during these intervals.

Receivables Turnover Analysis

The receivables turnover ratio, which measures the efficiency of the company in collecting its receivables, fluctuated within a range of approximately 6.18 to 8.7 times per year. The highest turnover ratio, 8.7, occurred in mid-2020, indicating improved collection efficiency despite the drop in revenue during the same period. Conversely, the ratio was lowest around late 2019 at 6.18, coinciding with increased accounts receivable balances. Overall, the ratio's fluctuations imply periodic variations in collection performance possibly influenced by changes in credit policies or customer payment behaviors.

In summary, the data indicate solid revenue growth with some variability corresponding to external or operational factors. The rise in accounts receivable is generally in line with revenue increases but at times suggests potential collection challenges. Receivables turnover reflects varying effectiveness in managing collections, with notable improvement in certain periods that helped offset impacts of revenue volatility.

Cost of Revenue

The cost of revenue exhibits a general upward trend over the analyzed periods, increasing from 230 million USD in early April 2017 to 338 million USD by October 2021. There are some fluctuations within intermediate quarters; for example, a notable peak occurs in December 2018 at 278 million USD, followed by a decrease to 240 million USD by June 2020. However, after mid-2020, the cost steadily rises again, reaching the highest recorded figure in the dataset at 338 million USD.

Accounts Payable

Accounts payable values fluctuate within a broad range but show an overall increasing trend from 142 million USD in April 2017 to 248 million USD by October 2021. There are periods of decline, such as between December 2019 and June 2020, when payable amounts decrease from 149 million USD to 130 million USD. Following this decline, accounts payable increase consistently, reflecting possibly extended credit terms or increased operational scale.

Payables Turnover Ratio

The payables turnover ratio demonstrates volatility with several peaks and troughs across quarters. Initially, the ratio decreases from 5.54 to 4.79 between April and July 2017, followed by a rise and subsequent fluctuations around the 5.5 to 6.5 range for several quarters. A significant increase is observed in the period ending March 2019, peaking at 7.67, indicating faster payment cycles or reduced payables. After mid-2019, the ratio shows a general declining trend, dropping to 5.3 by October 2021. This decline may suggest slower payment or increased accounts payable balances relative to cost of goods sold.

Summary Insights

Overall, the cost of revenue has increased markedly over the analyzed quarters, reflecting potentially higher production costs or expanded business operations. Concurrently, accounts payable have increased, which might indicate extended supplier credit or increased purchases on credit terms. The payables turnover ratio’s fluctuations indicate variable efficiency in managing payables, with a trend towards slower turnover in recent quarters. Together, these patterns suggest that while the company faces rising costs, it may also be leveraging payables to support liquidity or capital management strategies in recent periods.

Working Capital

Working capital showed a general increasing trend from April 2017 through July 2021, rising from 1,796 million USD to a peak of 4,436 million USD. This growth indicates enhanced short-term liquidity and the company's ability to cover its current liabilities with current assets. However, a significant decline was observed in the last reported quarter ending October 2021, with working capital dropping sharply to 1,537 million USD, the lowest point in the observed period.

Revenue

Revenue exhibited a gradual upward trajectory from April 2017 to October 2021, increasing from 598 million USD to a high of 1,126 million USD in July 2021, before a modest decline to 1,108 million USD in October 2021. The revenue growth over the analyzed quarters reflects the company’s expanding sales or operational scale. Notably, revenue decreased noticeably in the quarter ending June 2020, coinciding with the period affected by global economic disruptions, but it subsequently recovered and surpassed previous levels by 2021.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently working capital is used to generate revenue, displayed a declining trend from 1.35 in April 2017 to approximately 0.79 in April 2021, indicating decreasing efficiency in generating revenue relative to working capital invested over this timeframe. Interestingly, there was a sudden and significant increase in this ratio to 2.78 in the final quarter (October 2021), reflective of the sharp drop in working capital combined with sustained revenue levels, which improved the turnover metric substantially in that period.

Overall Insights

The data reveals a company that generally improved its revenue and working capital levels steadily over the years. However, the pronounced contraction in working capital towards the end of the period while maintaining relatively strong revenue suggests a change in capital management strategy or operational dynamics. The spike in working capital turnover ratio in the last quarter further supports this, indicating a more efficient use of working capital or a possible reduction in liquidity buffer. These trends warrant monitoring to assess impacts on operational stability and financial flexibility going forward.

The analysis of the quarterly financial data reveals notable trends in both the inventory turnover ratio and the average inventory processing period over the examined time frame.

Inventory Turnover

The inventory turnover ratio generally demonstrates a cyclical yet overall improving trend from April 2017 through October 2021. Initially, the ratio fluctuates mildly around 2.6 to 2.8 in 2017 and through much of 2018, indicating a relatively stable frequency of inventory replacement.

A decline is observed towards mid-2020, where turnover drops to a low of approximately 2.29 in June 2020, possibly reflecting inventory management challenges or reduced sales velocity. However, from that point onward, there is a significant recovery and strengthening, with turnover ratios increasing steadily and reaching a peak of 3.28 by October 2021. This upward movement suggests enhanced efficiency in inventory management or stronger sales performance in the latter periods.

Average Inventory Processing Period

Conversely, the average inventory processing period, expressed in days, inversely correlates with the turnover ratio. Starting around 139 days in early 2017, this metric remains fairly consistent with minor fluctuations through 2018 and early 2019, generally staying within the 130-140 day range.

A marked increase in the processing period is evident in mid-2020, peaking at 160 days in June 2020. This elongation aligns with the drop in inventory turnover and may reflect operational disruptions, increased inventory levels, or slower sales cycles during that period.

Following this peak, a significant reduction occurs through late 2020 and into 2021, with the processing period falling to approximately 111 days by October 2021. This reduction indicates improved inventory efficiency and faster movement of goods, coherent with the simultaneous rise in inventory turnover ratios.

In summary, the data portrays a period of relative stability from 2017 to 2019, a disruption or efficiency decline around mid-2020, and a strong recovery thereafter through 2021 marked by improved inventory turnover and shortened processing periods. This recovery suggests effective inventory management adjustments or revitalized market demand during the final quarters analyzed.

The analysis of the receivables turnover and the average receivable collection period over the observed periods reveals fluctuations with identifiable patterns suggesting changes in credit and collections efficiency.

Receivables Turnover

The receivables turnover ratio generally exhibits variability across the quarters. Starting from 6.59 and slightly increasing to a peak of 8.7 in June 2020, it then declines and stabilizes around the 6.6 to 7.3 range in the subsequent periods. This indicates periods of stronger collection efficiency around mid-2020, followed by a normalization.

Average Receivable Collection Period

Corresponding to the turnover ratio, the average receivable collection period shows an inverse relationship as expected. It starts at 55 days, decreases to the lowest point of 42 days in June 2020, aligning with the peak in receivables turnover, and then increases again to around 50-55 days in later periods. This reinforces the pattern of improved collection efficiency around mid-2020 followed by a reversion towards previous levels.

Trend Insights

The mid-year 2020 period marks the most efficient management of receivables within the range observed, with a higher turnover ratio and reduced collection period, potentially reflecting more effective credit management or collection policies during that time. The data subsequent to this shows a decline in efficiency back to historical levels, indicating either easing of collection strictness or external factors impacting receivables turnover.

Overall

The receivables management practices demonstrate cyclic fluctuations, with efficiencies peaking in mid-2020. While generally stable, the variation suggests responsiveness to operational or market conditions affecting the company’s credit collection processes.

Average Inventory Processing Period

The average inventory processing period exhibited fluctuations across the observed quarters. Initially, it remained relatively stable around the low to mid-130s days between early 2017 and early 2018. Subsequently, there was a general increase reaching a peak of 160 days in mid-2020, indicating an elongation in the time taken to process inventory. Following this peak, a noticeable decline occurred in late 2020 and through 2021, reducing the period to approximately 111 days by the end of the observation window. This suggests improvements in inventory management efficiency in the later periods after a phase of lengthened processing times.

Average Receivable Collection Period

The average receivable collection period demonstrated a decreasing trend from early 2017 through mid-2018, moving from about 55 to 46 days, which implies faster collections. However, variability was observed after mid-2018, with periods extending back above 55 days by late 2019. Another reduction phase followed in 2020, reaching as low as 42 days mid-year, suggesting enhanced receivables management. Towards the end of the dataset, collection days edged upwards slightly but remained generally lower than initial periods, hinting at a moderate improvement in receivable turnover compared to the earliest quarters.

Operating Cycle

The operating cycle, calculated as the sum of the inventory processing and receivable collection periods, reflected changes consistent with its components. It started near 194 days in early 2017, experienced minor declines and increases till mid-2018, followed by a peak near 203 days in mid-2020, coinciding with the high inventory processing period at that time. From late 2020 to 2021, the operating cycle steadily contracted to around 161-163 days, indicating improved operational efficiency overall. This decreasing trend toward the end of the timeframe suggests a reduced cash conversion cycle, likely enhancing liquidity and operational responsiveness.

Payables Turnover Ratio

The payables turnover ratio shows a fluctuating pattern over the analyzed periods. Initially, the ratio decreased from 5.54 to 4.79, indicating a slower turnover of payables. It then increased steadily reaching a peak around the end of the first quarter of 2019 at 7.67. This trend reflects more frequent payments to suppliers during this time. However, from mid-2019 onwards, the turnover ratio declined gradually, reaching values close to 5.3 by October 2021. This decrease suggests a reduction in the rate at which payables are settled toward the end of the period.

Average Payables Payment Period (Number of Days)

The average payables payment period exhibited an inverse pattern relative to the payables turnover ratio, as expected. Beginning at 66 days, the payment period initially lengthened to 76 days, indicating slower payment to suppliers. It then tended to shorten significantly, reaching a low of 45 days in March 2020, coinciding with periods of higher turnover. Following this low point, the days payable slowly increased again reaching 69 days by October 2021, reflecting slower payment practices toward the end of the timeline.

Overall Analysis

There is a clear inverse relationship between payables turnover and the average payment period over the quarters analyzed. Periods of higher payables turnover correspond with shorter payment periods and vice versa. The data suggests improved liquidity management during early 2019 and early 2020 with faster payments. Conversely, the latter part of the timeline shows a trend toward extending payment periods, possibly as a cash management strategy or response to external factors impacting cash flow management. The fluctuations indicate adaptive changes in payables management rather than a consistent trend in either acceleration or deceleration of payments.

The financial data reveals several trends in the company's operational efficiency from 2017 through 2021, particularly focusing on inventory, receivables, payables, and the overall cash conversion cycle.

Average Inventory Processing Period

The average inventory processing period exhibits moderate fluctuations over the analyzed timeframe. Starting at 139 days in early 2017, it generally stayed within the 130-140 day range until late 2019. There is a notable increase to 160 days by mid-2020, indicating a slower turnover during that period. However, following this peak, the period decreased to 111 days by late 2021, suggesting improved inventory management efficiency toward the end of the period.

Average Receivable Collection Period

The average receivable collection period showed relative stability with minor variability. Initially around 55 days in 2017, it experienced a decline to a low of 42 days around mid-2020, marking an improvement in collection speed. After that, the period slightly increased again to approximately 52 days by late 2021, indicating a modest reduction in collection efficiency compared to the mid-2020 low but still better than the initial measurements.

Average Payables Payment Period

The average payables payment period displayed more variability. Starting at 66 days in early 2017, the period decreased to approximately 56 days by mid-2018, reflecting quicker supplier payments. From late 2019 onwards, there was a gradual increase reaching 69 days by late 2021, suggesting an extended timeframe for settling payables. This elongation might reflect strategic cash management or changing supplier terms.

Cash Conversion Cycle

The cash conversion cycle (CCC) mirrors the interplay of the above components. Initially positioned around 123-128 days between 2017 and early 2018, the CCC increased to a peak of 151 days by late 2019, indicating a lengthening in the time taken to convert investments in inventory and other inputs into cash flows from sales. A decrease followed, with the CCC falling significantly to 94 days by late 2021. This shortening suggests an overall enhancement in working capital efficiency, driven by improved inventory turnover, receivable collection, and moderately extended payables payment periods.

Overall, the company experienced some operational slowdowns around 2019 to mid-2020, marked by longer inventory periods and a rising cash conversion cycle. Subsequently, notable improvements in inventory processing and receivable collection contributed to a reduced cash conversion cycle by 2021, indicating enhanced liquidity management and operational efficiency.