KLA Corp. (NASDAQ:KLAC)

The data reveals various trends in the operational efficiency and working capital management over the observed periods.

Inventory Turnover

The inventory turnover ratio shows a declining trend overall, falling from 1.48 in 2019 to 1.29 in 2024. This indicates a slower rate of inventory turnover, which suggests that inventory is being held longer as time progresses.

Receivables Turnover

The receivables turnover ratio generally shows an upward trend from 4.61 in 2019 to a peak of 5.99 in 2023, followed by a slight decline to 5.35 in 2024. This implies that receivables are being collected more efficiently over time, though there is a minor recent reversal.

Payables Turnover

The payables turnover ratio exhibits variability but remains relatively high, fluctuating between 8.1 and 11.37. Notably, there is a significant increase in 2023 (11.37) and a slight decrease in 2024 (10.93), indicating the company is taking longer to pay its suppliers during these later years.

Working Capital Turnover

The working capital turnover ratio demonstrates an improving trend, rising from 1.79 in 2019 to a peak of 2.27 in 2023, but it declines to 1.83 in 2024. This suggests more efficient use of working capital until a decrease in efficiency in the latest period.

Average Inventory Processing Period

The average inventory processing period initially decreased from 247 days in 2019 to a low of 195 days in 2020, then gradually increased to 282 days by 2024. This reversal indicates diminishing inventory management efficiency and longer holding periods for inventory.

Average Receivable Collection Period

The average receivable collection period drops steadily from 79 days in 2019 to 61 days in 2023, improving collection efficiency. However, in 2024, it rises slightly to 68 days, suggesting a small decline in collection speed.

Operating Cycle

The operating cycle shows an increasing trend from 326 days in 2019 to 350 days in 2024, indicating that the combination of inventory processing and receivable collection periods has lengthened, which may affect liquidity.

Average Payables Payment Period

The average payables payment period remains fairly stable around the low 40s to mid-30s days, with a slight decrease from 45 days in 2021 and 2022 to 33 days in 2024. This reflects a somewhat consistent payment period with minor acceleration in payments recently.

Cash Conversion Cycle

The cash conversion cycle decreases significantly from 286 days in 2019 to 226 days in 2020, showing improved cash flow management. However, it then lengthens steadily to 317 days by 2024, indicating that the company is taking longer to convert investments in inventory and receivables back to cash.

Costs of Revenues

The costs of revenues increased significantly from 1,869,377 thousand US dollars in June 2019 to a peak of 4,218,307 thousand US dollars in June 2023. However, this upward trend reversed slightly in the following year, declining to 3,928,073 thousand US dollars as of June 2024. Overall, there was a substantial growth over the five-year period despite the recent reduction.

Inventories

Inventories demonstrated a steady and consistent increase over the analyzed period. Beginning at 1,262,500 thousand US dollars in June 2019, the inventory levels rose each year, reaching 3,034,781 thousand US dollars by June 2024. This represents more than a doubling of inventory value over five years, indicating an expansion in stockholdings or raw materials.

Inventory Turnover Ratio

The inventory turnover ratio initially improved from 1.48 in June 2019 to a high of 1.87 in June 2020, indicating a faster movement of inventory relative to prior years. However, since that peak, the ratio has steadily declined, falling to 1.29 by June 2024. This trend suggests that despite increased inventory levels, the rate at which inventory is sold or used in production has slowed, potentially implying overstocking or decreased sales efficiency.

Revenues

Revenues demonstrated a generally upward trajectory from June 2019 through June 2023, rising from approximately 4.57 billion to nearly 10.5 billion US dollars. However, in the latest period ending June 2024, revenues experienced a slight decline, decreasing to approximately 9.81 billion US dollars. This suggests that while the company showed strong growth over the five-year span, there may be early indications of a slowdown or market challenges in the most recent year.

Accounts Receivable, Net

The net accounts receivable balance showed a consistent increase across the observed periods, growing from just under 1 billion US dollars in June 2019 to over 1.83 billion US dollars by June 2024. This steady rise indicates an expansion in credit sales or delayed collection cycles, which may reflect higher sales volume or changes in credit policies.

Receivables Turnover

The receivables turnover ratio, which measures the efficiency of credit collection, showed moderate fluctuation. Starting at 4.61 in June 2019, it increased to a peak of 5.99 in June 2023, indicating improved collection efficiency during that time. However, it then declined to 5.35 in June 2024. Despite this slight decrease, the overall trend suggests an improvement compared to the initial period. The decline in the most recent year might reflect a lengthening of collection periods or challenges with credit management.

The analyzed financial data exhibits several notable trends in the company's cost and payable management over the six-year period ending June 30, 2024.

Costs of Revenues

The costs of revenues show a general increasing trend from 2019 to 2023, rising from approximately 1.87 billion to about 4.22 billion US dollars. However, there is a noticeable decline in the latest fiscal year, 2024, where costs decreased to approximately 3.93 billion US dollars. This pattern indicates a period of expansion or increased operational activity followed by a potential efficiency improvement or reduction in operational scale.

Accounts Payable

Accounts payable increased steadily from 202 million US dollars in 2019 to a peak of 443 million US dollars in 2022, indicating growing obligations to suppliers or extended credit terms. Following 2022, there was a decline in accounts payable to 371 million and then 359 million in 2024, suggesting a possible reduction in short-term liabilities or improved payment terms.

Payables Turnover Ratio

The payables turnover ratio remained relatively stable around 9.2 from 2019 to 2020 but then declined to 8.1 in 2021 and 2022, reflecting slower payment to creditors or longer operating cycles. In 2023, the ratio sharply increased to 11.37 and slightly decreased to 10.93 in 2024, which indicates a significant improvement in the company's ability to pay off its suppliers more quickly compared to previous years.

In summary, the company experienced growth in its costs and payables until 2022, followed by reductions in both costs of revenues and accounts payable in 2024. The improvement in the payables turnover ratio in the last two years suggests enhanced efficiency in managing payables despite the reduction in overall accounts payable balances.

Working Capital

Working capital demonstrates a consistent upward trend over the six-year period, increasing from approximately 2.55 billion US dollars in mid-2019 to over 5.37 billion US dollars by mid-2024. This growth indicates an expanding current assets base relative to current liabilities, suggesting improved liquidity and potential for operational scalability.

Revenues

Revenues show an overall upward trajectory from around 4.57 billion US dollars in mid-2019, peaking at nearly 10.5 billion US dollars in mid-2023. However, there is a noticeable decline in revenue in mid-2024 to approximately 9.81 billion US dollars, marking a reversal from the previous pattern of growth. This decrease may warrant further investigation into market conditions or operational issues impacting sales.

Working Capital Turnover

The working capital turnover ratio, reflecting how efficiently working capital generates revenue, generally improves from 1.79 in 2019 to a peak of 2.27 in 2023. In 2024, it declines to 1.83, nearing the level observed in 2019. This indicates that after a period of increasing efficiency in utilizing working capital to generate sales, the company experienced a reduction in operational efficiency or a change in working capital management effectiveness during the last year.

Summary

The company's working capital has more than doubled over the analyzed period, supporting growing operations and likely contributing to revenue increases until 2023. The decline in revenue and working capital turnover in the most recent year suggests potential challenges in maintaining growth momentum and operational efficiency. Continued monitoring of working capital management and revenue drivers is advisable to address the recent downward shifts.

The financial data reveals notable trends in the company's inventory management over the six-year period from mid-2019 to mid-2024.

Inventory turnover ratio

The inventory turnover ratio initially increased from 1.48 in June 2019 to a peak of 1.87 in June 2020, indicating improved efficiency in managing inventory during that period. However, from 2020 onward, the ratio exhibits a declining trend, dropping to 1.76 in 2021, 1.67 in 2022, 1.47 in 2023, and further down to 1.29 in 2024. This gradual decrease suggests a reduction in the frequency with which inventory is sold and replaced, potentially signaling slower sales, increased inventory levels, or less effective inventory management practices over time.

Average inventory processing period

The average number of days to process inventory shows an inverse pattern relative to the inventory turnover ratio. Starting at 247 days in mid-2019, this metric improved to 195 days in 2020, consistent with enhanced turnover seen that year. Following this improvement, the processing period steadily lengthened annually, rising to 207 days in 2021, 218 days in 2022, 249 days in 2023, and reaching 282 days in 2024. The elongation of the processing period indicates that inventory stays on hand longer before being sold or used, aligning with the decline in inventory turnover and possibly reflecting challenges in selling inventory or accumulating excess stock.

Overall, the data suggests that while there was a phase of improved inventory efficiency around 2020, the subsequent years have shown a consistent decline in turnover rate accompanied by longer processing periods. This trend may warrant closer examination of inventory management strategies to identify underlying causes and potential corrective actions to enhance operational performance.

Receivables Turnover

The receivables turnover ratio exhibited a general upward trend from 2019 to 2024, increasing from 4.61 in mid-2019 to a peak of 5.99 in mid-2023. This suggests an improvement in the company's efficiency in collecting its receivables over this period. However, there was a slight decline in 2024, with the ratio falling to 5.35, indicating a mild reduction in collection efficiency compared to the previous year.

Average Receivable Collection Period

The average collection period, measured in days, decreased from 79 days in 2019 to 68 days in 2024, demonstrating an overall improvement in the speed of receivables collection. Notably, the period dropped significantly to 61 days in mid-2023, marking the shortest collection duration during the timeframe. This inverse relationship between collection period and receivables turnover aligns with expected financial behavior, where a higher turnover corresponds to a lower collection period. A slight increase from 61 days to 68 days between 2023 and 2024 suggests a marginal slowdown in receivables collection efficiency at the end of the period.

Summary

Over the six-year span, the data indicates enhanced management of receivables, with improved turnover ratios and shorter collection periods pointing to more effective credit and collection policies. The peak efficiency observed around 2023 was followed by a minor reversal in 2024, which could warrant further investigation to determine if this is a temporary fluctuation or the start of a declining trend in receivables management.

The annual financial data reveals notable trends regarding the company’s inventory management, receivables collection, and overall operating cycle over a six-year period.

Average Inventory Processing Period

The average inventory processing period initially decreased from 247 days in 2019 to 195 days in 2020, indicating an improvement in inventory turnover and efficiency. However, this trend reversed over the subsequent years, increasing consistently from 195 days in 2020 to 282 days in 2024. The lengthening inventory period suggests growing challenges in inventory management or a strategic buildup of inventory levels in recent years.

Average Receivable Collection Period

The receivable collection period experienced a moderate but somewhat fluctuating decline over the period analyzed. It decreased from 79 days in 2019 to 61 days in 2023, illustrating a more effective collection process and possibly stricter credit policies or improved customer payments. However, in 2024, there was a slight increase to 68 days, indicating a potential loosening in collection efficiency or changes in credit terms.

Operating Cycle

The operating cycle, which combines the inventory processing period and receivable collection period, shows a general upward trend with some fluctuation. It dropped from 326 days in 2019 to a low of 265 days in 2020, paralleling the improvement in inventory and receivables management at that time. Subsequently, the operating cycle steadily increased to 350 days by 2024, reflecting the impact of extended inventory processing times despite relatively better receivables collection. This overall lengthening implies slower cash conversion and potentially increased working capital requirements.

In summary, while the company showed progress in managing receivables and reduced its operating cycle in the initial years, subsequent trends suggest deteriorating inventory turnover and an extended operating cycle. The recent lengthening of these periods may warrant closer evaluation of inventory controls and working capital management strategies to enhance operational efficiency and liquidity.

Payables Turnover

The payables turnover ratio demonstrated moderate fluctuations over the analyzed periods. Starting at 9.24 in 2019, it remained relatively stable through 2020 at 9.27. However, a notable decline occurred in 2021 and 2022, where the ratio decreased to 8.1 and maintained the same level the following year. Subsequently, there was a significant increase to 11.37 in 2023, followed by a slight decrease to 10.93 in 2024. This pattern indicates variability in the frequency with which payables are settled, with a peak efficiency period in 2023.

Average Payables Payment Period

The average payment period for payables displayed an inverse pattern relative to the payables turnover. Initially, the payment period was 40 days in 2019, shortening slightly to 39 days in 2020. A rise occurred in 2021 and 2022, lengthening the payment period to 45 days, suggesting slower payments during these years. This trend reversed in 2023 and 2024, where the payment periods contracted significantly to 32 and 33 days, respectively, reflecting accelerated payment cycles in the most recent periods.

Overall Insights

There is a clear inverse relationship between the payables turnover ratio and the average payment period, as expected. The decrease in turnover in 2021-2022 corresponds with an elongated payment period, indicating slower payment processing. In contrast, 2023 and 2024 show improved turnover ratios accompanied by shorter payment days, suggesting enhanced efficiency in managing payables. These shifts could reflect changes in operational policies or liquidity management strategies implemented during these times.

Average Inventory Processing Period

The average inventory processing period shows a fluctuating upward trend over the analyzed years. Starting at 247 days in 2019, it decreased to 195 days in 2020, indicating improved inventory turnover efficiency. However, from 2021 onward, the period gradually increased, reaching 282 days in 2024. This rise suggests a lengthening of the time inventory remains before being processed, which could imply potential issues in inventory management or changes in product mix or demand.

Average Receivable Collection Period

The average time taken to collect receivables generally decreased from 79 days in 2019 to a low of 61 days in 2023, reflecting an improvement in cash inflows from customers and possibly more effective credit policies or collections management. There is a minor increase to 68 days in 2024, which may warrant monitoring, but overall the period remains shorter than the initial years, indicating better receivable management compared to 2019.

Average Payables Payment Period

The period for paying suppliers demonstrates relative stability with slight fluctuations. It started at 40 days in 2019, remained nearly constant around 39-45 days through 2021-2022, then decreased to 32 days in 2023 and slightly increased to 33 days in 2024. The reduction in payment period in recent years suggests faster payments to suppliers, which could affect cash outflows and reflect changes in supplier credit terms or company strategy.

Cash Conversion Cycle

The cash conversion cycle, which measures the time between outlay of cash and cash recovery, follows a pattern reflective of the components described above. It improved significantly from 286 days in 2019 to 226 days in 2020, indicating enhanced operational cash flow management. However, after that, it shows a steady upward trend, increasing to 317 days by 2024. This extension implies that overall operational efficiency in converting inputs into cash has declined in recent years, primarily driven by a considerable increase in inventory processing time despite improvements in receivables collection and faster payables payments.