Intuitive Surgical Inc. (NASDAQ:ISRG)

The financial ratios and periods under review reveal several notable trends across the operating efficiency and working capital management categories.

Inventory Turnover and Average Inventory Processing Period

The inventory turnover ratio showed an improving trend from 2.49 in March 2021 to a peak around 2.98 in March 2022. Subsequently, there was a consistent decline, reaching a low of approximately 1.75 to 1.85 by March 2025. This decrease in turnover corresponds with a lengthening average inventory processing period, which rose steadily from 147 days in March 2021 up to a peak near 208 days by late 2024 before slightly declining to 198 days in March 2025. Together, these patterns suggest slower inventory movement and more prolonged holding periods over time.

Receivables Turnover and Average Receivable Collection Period

Receivables turnover experienced an increase from 6.75 in March 2021 to a peak near 7.9 by year-end 2021, indicating faster collections. However, turnover subsequently declined, fluctuating in the 6.3 to 7.4 range through early 2025, ending around 7.13. The average receivable collection period correspondingly decreased from 54 days at the start of the period to lows around 46 days by year-end 2020, then showed a fluctuating pattern mostly between 50 and 58 days. These movements imply some variability in credit collection efficiency but a broadly stable collection period towards the end.

Payables Turnover and Average Payables Payment Period

Payables turnover declined significantly from 18.35 in March 2021 to a range between 10.39 and 14.05 by early 2025, reflecting a trend toward slower payments to suppliers. The average payables payment period extended from 20 days in early 2021 up to values mostly in the high twenties and low thirties by 2025, reaching as high as 35 days in March 2025. This suggests that vendor payment terms have lengthened or the company is taking longer to pay creditors, which could be a cash management strategy.

Working Capital Turnover

The working capital turnover ratio improved consistently from 0.77 in March 2021 to a high around 1.56 in late 2024, before a slight reduction to 1.42 by March 2025. This steady increase signals enhanced efficiency in using working capital to generate revenue over these years.

Operating Cycle and Cash Conversion Cycle

The operating cycle decreased from 201 days in March 2021 to about 170-172 days by late 2020 but then increased steadily to approximately 261 days by late 2024 before slightly dropping to 249 days in early 2025. Similarly, the cash conversion cycle showed a decrease initially, reaching a low near 146 days by the end of 2020, then climbed steadily to peak around 230 days in late 2024, with a modest decline to 214 days by March 2025. These increases in cycles indicate longer durations to convert resources into cash, potentially due to lengthening inventory and receivable periods outweighing payment terms.

In summary, the data reflect improving working capital efficiency early in the period, followed by deteriorating inventory management and collection cycles, and gradually extended payment periods to suppliers. These changes have collectively led to longer operating and cash conversion cycles, indicating slower asset turnover and cash recovery toward the latter periods. Management may need to focus on optimizing inventory turnover and balancing receivables and payables terms to improve liquidity and operational efficiency.

Cost of Revenue

The cost of revenue exhibited an overall upward trend over the observed periods. Starting at approximately $361.3 million in the first quarter of 2020, it fluctuated moderately through 2020 and 2021, with notable increases in the second half of 2021 and throughout 2022. From early 2023 onwards, costs continued to rise more sharply, reaching nearly $795.7 million by the first quarter of 2025. This pattern indicates increasing expenses associated with generating revenue, possibly due to higher production costs, increased sales volume, or changes in pricing and cost structure.

Inventory

Inventory levels showed a consistent and significant increase across the periods analyzed. Beginning at around $620.3 million in the first quarter of 2020, inventory grew steadily each quarter, accelerating particularly from 2022 onwards. By the first quarter of 2025, inventory reached approximately $1.55 billion, which is more than double the initial value. This consistent buildup in inventory may suggest expansion efforts, preparation for rising demand, or potential overstocking issues.

Inventory Turnover Ratio

The inventory turnover ratio, available from the fourth quarter of 2020, initially demonstrated an improving trend, moving from approximately 2.49 to a peak near 2.98 in the first quarter of 2021, indicating more efficient inventory management and faster inventory movement. However, after this peak, the ratio displayed a steady decline, falling to near 1.75 by the third quarter of 2024 before slightly rebounding to 1.85 by the first quarter of 2025. This decline suggests that inventory was turning over more slowly, which could imply accumulating stock or slower sales relative to inventory levels.

Summary of Insights

The data reveal that while cost of revenue and inventory levels have been rising significantly over the examined time frame, the efficiency of inventory usage, as measured by the inventory turnover ratio, has deteriorated following an initial improvement phase. The persistent increase in inventory alongside a declining turnover ratio may point to potential challenges in managing stock relative to sales volume or could reflect strategic decisions to increase stock holdings in anticipation of future sales. The elevated and growing cost of revenue combined with these inventory trends warrants further examination into operational efficiency, demand forecasts, and supply chain management.

Revenue Trends

The revenue exhibits a general upward trend over the period analyzed, starting at approximately $1,099,500 thousand in March 2020 and increasing to $2,253,400 thousand by March 2025. There are fluctuations within quarters, with occasional slight declines, such as from March to June 2020 and between September and December 2023, but the overall trajectory is growth. Notably, the revenue growth accelerates from 2022 onward, reaching its highest point in December 2024 at $2,413,500 thousand.

Accounts Receivable, Net

Accounts receivable also follow an increasing pattern, rising from $527,600 thousand in March 2020 to $1,221,500 thousand by March 2025. This increase is consistent with the rise in revenue, reflecting expanding business volume. There are some periods of decline or stabilization, such as between March and June 2023, but the general trend is upward. The growth in receivables is moderate compared to revenue growth, suggesting effective management of credit policies.

Receivables Turnover Ratio

The receivables turnover ratio shows fluctuations, with data available starting from September 2020. Initially, the ratio increased from 6.75 to a peak of 7.9 in December 2020, indicating improved efficiency in collecting receivables. However, after this peak, the ratio generally trends downward with some oscillations around the 6.3 to 7.4 range. The lowest points appear between March 2023 and March 2024, implying slower collections during that period. Towards the end of the period, the turnover ratio modestly recovers to approximately 7.13, indicating a slight improvement in receivables management.

Overall Insights

The data reflects a growing enterprise with rising revenues and increasing receivables. Although the accounts receivable balance grows, it does so in a manner that corresponds with revenue expansion, signifying maintained credit control. The receivables turnover ratio's fluctuations suggest varying collection efficiency, with periods of both improvement and deterioration. The recent improving trend in turnover ratio toward the end of the dataset may imply strengthened efforts in collections or better credit management policies going forward.

Cost of Revenue

The cost of revenue exhibits an overall upward trend throughout the observed periods. Starting from $361.3 million in Q1 2020, it experienced fluctuations but generally increased, reaching approximately $795.7 million by Q1 2025. Notably, there were intermittent spikes, such as in Q4 2020 and Q4 2023, suggesting periods with higher expenses associated with revenue generation. The growth in cost of revenue indicates expanding operational capacity or increased expenses related to production or service delivery.

Accounts Payable

Accounts payable values also demonstrate a rising pattern from $133.4 million in Q1 2020 up to $276.2 million in Q1 2025. The progression is not strictly linear; some quarters reflect decreases or stabilization, such as Q4 2021 to Q1 2022 and Q1 2024 to Q2 2024. The general increase implies the company is extending its payment obligations, possibly due to increased purchasing activity or evolving credit terms with suppliers.

Payables Turnover Ratio

The payables turnover ratio starts at a high level around 18.35 in Q1 2020 and displays a gradual declining trend over the timeline, ending near 10.39 in Q1 2025. This decline indicates the company is taking longer to settle its payable balances relative to cost of revenue. The turnover ratio reduction may reflect changes in payment policies, supplier negotiations, or working capital management strategies.

Overall Insight

The simultaneous rise in both cost of revenue and accounts payable alongside the decline in payables turnover ratio suggests that while operational expenditures and purchases are increasing, the company is also extending the time it takes to pay its suppliers. This shift could be a strategic move to improve cash flow management amid growing business activities. However, the decreasing payables turnover ratio might require monitoring to ensure supplier relationships remain stable and financial obligations manageable.

Working Capital

The working capital showed a general upward trend from March 31, 2020, through the end of 2021, increasing from approximately 3.75 billion to around 4.7 billion US dollars. This was followed by fluctuations between 4.8 billion and 7.2 billion US dollars from 2022 to 2023, peaking in the third quarter of 2023 at approximately 7.2 billion. In 2024, working capital displayed a modest decline, ending at approximately 6.1 billion by March 31, 2025.

Revenue

Revenue exhibited variability in the early quarters of 2020, starting at approximately 1.1 billion and dipping to around 0.85 billion before rebounding to about 1.3 billion by the end of 2020. The revenue continued to increase steadily through 2021, reaching approximately 1.55 billion by December. From 2022 onwards, revenue showed a consistent upward trajectory, moving from 1.49 billion to around 2.4 billion by the first quarter of 2025, reflecting strong and sustained growth over this period.

Working Capital Turnover Ratio

This ratio, calculated starting in September 2020, indicated improving efficiency in the use of working capital relative to revenue. The ratio increased from 0.77 in September 2020 to 1.29 by March 2022, reflecting enhanced operational efficiency. Following a dip to 1.03 in the third quarter of 2022, the ratio rebounded and rose steadily, peaking at 1.56 by the third quarter of 2024. The ratio slightly decreased afterwards but remained relatively high at 1.42 by March 2025, implying continued effective utilization of working capital in generating revenue.

Overall Financial Pattern

The data reflects a generally positive revenue growth trend coupled with fluctuating but overall increasing working capital levels through most quarters analyzed. The working capital turnover ratio's enhancement over time suggests that the company improved its efficiency in deploying working capital to generate sales. Some volatility in working capital and turnover ratios in late 2022 and early 2023 suggests possible operational adjustments or shifts in capital structure, but the strong revenue growth during this period mitigates concerns. The overall results imply strengthening financial performance and operational efficiency across the quarters covered.

Inventory Turnover Ratio

The inventory turnover ratio shows a generally declining trend over the periods analyzed. Starting at 2.49 in March 2020, it increased modestly, reaching a peak of 2.98 in March 2022. Following this peak, the ratio steadily decreased to 1.85 by March 2025. This decline indicates a slower rate of inventory turnover in recent quarters, suggesting potential challenges in inventory management or reduced sales velocity.

Average Inventory Processing Period

The average inventory processing period exhibits an inverse pattern relative to the turnover ratio, increasing from 147 days in March 2020 to 200 days by March 2025. After initially improving to 122 days in March 2022, it lengthened gradually but consistently thereafter, reaching a high of 208 days in December 2024 before slightly decreasing to 198 days in March 2025. This indicates that on average, inventory is being held longer before being processed or sold, which may imply inefficiencies or slowing demand.

Overall Insights

The inverse relationship between the inventory turnover ratio and the average inventory processing period over the observed periods is clear. The peak turnover and lowest inventory days occurred around early 2022, after which inventory efficiency appeared to deteriorate. This trend suggests the company faces increasing inventory holding times and reduced turnover speed, factors that could impact liquidity and operational efficiency if not addressed.

Receivables Turnover

The receivables turnover ratio shows variation over the observed periods, starting around 6.75 and gradually increasing to a peak of approximately 7.9 by the end of 2020. This indicates a stronger efficiency in collecting receivables during that time. However, after this peak, the ratio experiences fluctuations, decreasing to lows near 6.3 and then slightly recovering to values around 7.13 by the end of the forecasted periods. Overall, the turnover ratio suggests a moderate level of efficiency in receivables management, with some volatility but generally maintaining values close to the 6.5 to 7.5 range.

Average Receivable Collection Period

The average collection period exhibits an inverse trend to the receivables turnover. Initially, it decreases from 54 days to 46 days by the end of 2020, reflecting faster collection of receivables. Following this, the period rises again reaching values as high as 58 days in early 2024, indicating a slower collection process. Toward the latest periods, the number of collection days stabilizes generally around 51 to 54 days. These movements suggest some variability in collection efficiency, with periods of improvement followed by a lengthening of collection times, potentially aligning with shifts in business activity or credit policy.

Inventory Processing Period

The average inventory processing period displayed a consistent pattern of increase beginning from the first reported quarter in March 2021. Initially, it decreased from 147 days in March 2021 to 122 days by March 2022, indicating an improvement in inventory turnover efficiency. However, starting from June 2022, the period extended steadily from 130 days up to 208 days in December 2024, before slightly decreasing to 198 days in March 2025. This trend suggests a growing challenge in managing inventory efficiently in the latter periods.

Receivable Collection Period

The average receivable collection period fluctuated mildly throughout the reported quarters. It initially decreased from 54 days in March 2021 to a low of 46 days at the end of December 2020, then rose again to 56 days in June 2022. Afterward, the collection period showed some variability, generally oscillating between 50 and 58 days. By March 2025, the period reduced slightly to 51 days. Overall, the receivable collection period remained relatively stable, indicating steady credit management practices with occasional fluctuations.

Operating Cycle

The operating cycle mirrored the trends observed in inventory processing and receivables collection periods, starting at 201 days in March 2021 and declining to 172 days by December 2021, pointing to improved operational efficiency. However, from March 2022 onward, the cycle progressively lengthened, reaching a peak of 261 days in December 2024 before decreasing slightly to 249 days by March 2025. This extension suggests that overall operations, including inventory turnover and receivables collection, became less efficient over time, subsequently increasing the working capital cycle duration.

Payables Turnover Ratio

The payables turnover ratio shows an overall declining trend from March 31, 2021, through March 31, 2025. It starts relatively high at 18.35 and decreases to a low of 10.39 by March 31, 2025. Within this period, fluctuations are observed, with occasional minor recoveries, such as the increase from 11.1 to 12.69 between March and September 2023. However, the general movement indicates a reduction in the frequency of payables being turned over, suggesting either an increase in payable balances or slower payments to suppliers over time.

Average Payables Payment Period (in Days)

The average payables payment period complements the trend observed in the payables turnover. Beginning from 20 days in March 31, 2021, there is a gradual increase peaking at 35 days by March 31, 2025. This indicates a lengthening of the time taken by the company to settle its payables. Although there are some fluctuations, the extended payment period suggests a shift towards longer credit terms or delayed payments to suppliers.

General Insights

The inverse relationship between the payables turnover ratio and the average payables payment period is consistent with standard financial behavior, where a lower turnover ratio aligns with a longer payment period. This might reflect intentional management strategies to optimize cash flows or could indicate changes in supplier terms or company payment policies over the analyzed periods. The patterns reveal that the company has progressively extended its payable payment timeframe, which could affect supplier relationships or reflect operational cash management priorities.

The analysis of the financial data reveals several key trends in the company's working capital management over the observed periods.

Average Inventory Processing Period

This metric shows a generally increasing trend from 147 days in March 2021 to a peak of 208 days in December 2024. There is a slight decline to 200 days in March 2025, suggesting that inventory turnover times have lengthened substantially over the period, potentially indicating slower inventory movement or buildup.

Average Receivable Collection Period

The receivable collection period demonstrates relative stability with minor fluctuations. It decreased from 54 days in March 2021 to a low of 46 days in December 2020, then rose to around 56 days in June 2023 before declining again to 51 days by March 2025. This suggests consistent effectiveness in collecting receivables, with no significant deterioration or improvement.

Average Payables Payment Period

This measure shows variability, increasing from 20 days in March 2021 to a peak of 35 days in March 2025. Periods of relative stability are interspersed with increases, indicating a trend toward longer payment cycles to suppliers over time, which may reflect strategic efforts to manage cash outflows.

Cash Conversion Cycle

The cash conversion cycle has exhibited a steady increase from 181 days in March 2021 to a peak of 230 days in December 2024, followed by a slight reduction to 214 days by March 2025. This rise indicates that the company is taking longer to convert its investments in inventory and receivables back into cash, which may have implications for liquidity and working capital efficiency.