Lam Research Corp. (NASDAQ:LRCX)

The short-term operating activity ratios reveal several notable trends over the observed period. Generally, a shift in working capital management is apparent, with changes in inventory, receivables, and payables impacting the overall operating cycle and cash conversion cycle. Inventory turnover demonstrates a consistent decline from 2.77 to 2.56, before a slight recovery to 2.56, indicating a lengthening of the average inventory processing period.

Inventory Management

Inventory turnover decreased from 2.77 to 1.75 over the initial period, suggesting a slower rate of inventory sales. The average inventory processing period correspondingly increased from 132 days to 208 days, indicating that inventory is taking longer to convert into sales. A slight improvement is observed in the most recent periods, with turnover increasing to 2.56 and the processing period decreasing to 143 days.

Receivables Management

Receivables turnover exhibits more volatility, increasing from 4.77 to 6.17 before decreasing to 5.89. This suggests fluctuations in the efficiency of collecting receivables. The average receivable collection period generally decreased from 77 days to 62 days, then increased to 62 days, indicating a generally faster collection of receivables, though with recent stabilization.

Payables Management

Payables turnover increased significantly from 8.94 to 20.50, then decreased to 10.05, indicating a change in the speed at which the company pays its suppliers. The average payables payment period decreased from 41 days to 18 days, then increased to 36 days, suggesting the company initially shortened its payment terms, then extended them again. This could be a strategic shift to manage cash flow or negotiate better terms with suppliers.

Overall Efficiency

Working capital turnover increased from 1.41 to 2.63, indicating improved efficiency in utilizing working capital to generate sales. The operating cycle initially decreased from 209 days to 201 days, then increased to 263 days, reflecting the combined effect of changes in inventory, receivables, and payables. The cash conversion cycle followed a similar pattern, increasing from 168 days to 252 days, before decreasing to 169 days, suggesting a lengthening of the time it takes to convert investments in inventory and receivables into cash, followed by a recent improvement.

In summary, the company experienced a period of evolving working capital management. Initial trends indicated a slowing of inventory turnover and a faster collection of receivables, coupled with a significant shift in payables management. More recent periods show some stabilization and slight improvements in inventory turnover and the cash conversion cycle, but continued monitoring is warranted to assess the sustainability of these trends.

Inventory turnover exhibited a generally declining trend over the observed period, although with some fluctuations. Initially, the ratio remained relatively stable, followed by a more pronounced decrease in later quarters. A detailed examination reveals distinct phases in the company’s inventory management performance.

Initial Stability (Sep 27, 2020 – Jun 27, 2021)

The inventory turnover ratio began at 2.77 and fluctuated modestly, reaching 2.91. This suggests a consistent, albeit not rapidly changing, rate at which inventory was being sold and replenished during this period. Cost of goods sold demonstrated a steady increase, while inventory levels also rose, maintaining a relatively consistent turnover.

Moderate Decline (Sep 26, 2021 – Jun 26, 2022)

A gradual decline in inventory turnover commenced, moving from 2.95 to 2.36. This coincided with a continued increase in both cost of goods sold and inventory levels, indicating that inventory was accumulating at a faster rate than sales. The rate of increase in cost of goods sold began to outpace the rate of increase in inventory.

Accelerated Decrease (Sep 25, 2022 – Jun 25, 2023)

The ratio experienced a more significant decrease, falling from 2.24 to 2.00. Inventory levels continued to climb substantially, while the growth in cost of goods sold slowed. This suggests a weakening in the efficiency of inventory management, with a larger investment in inventory relative to sales.

Lowest Point and Initial Recovery (Sep 24, 2023 – Jun 30, 2024)

Inventory turnover reached its lowest point at 1.77 in September 2023, before beginning a modest recovery to 1.86. Inventory levels began to decrease slightly, while cost of goods sold remained relatively stable. This suggests initial efforts to address the inventory buildup were beginning to have a limited effect.

Recent Improvement (Jul 30, 2024 – Jun 29, 2025)

The most recent quarters show a positive trend, with the inventory turnover ratio increasing from 1.95 to 2.56. This improvement is associated with a combination of increasing cost of goods sold and decreasing inventory levels, indicating a more efficient utilization of inventory. The rate of increase in cost of goods sold is now exceeding the rate of decrease in inventory.

Overall, the observed pattern suggests a period of increasing inventory levels relative to sales, followed by recent efforts to improve inventory management efficiency. The recent upward trend in inventory turnover is a positive sign, but continued monitoring is necessary to assess the sustainability of this improvement.

The receivables turnover ratio for the analyzed period demonstrates fluctuations, generally remaining within a range of approximately 3.94 to 6.46. An initial observation reveals a decrease from 4.77 in September 2020 to 4.11 in December 2020, followed by a period of relative stability and slight increases through December 2021, peaking at 4.86. A subsequent decline is then observed through June 2022, reaching a low of 3.99. The ratio then experiences a notable increase, reaching 5.78 in March 2023, before fluctuating again in subsequent quarters.

Overall Trend

The receivables turnover ratio exhibits cyclical behavior over the analyzed timeframe. While there isn't a consistently strong upward or downward trend, periods of increase are often followed by periods of decrease. The most significant increase occurs between June 2022 and March 2023.

Recent Performance (2023-2025)

From March 2023 through December 2023, the ratio decreased from 5.78 to 5.29. The first half of 2024 shows an increase to 6.46 in March, followed by a decrease to 5.92 in June. The ratio continues to decline through the end of 2024, reaching 4.90 in December. The trend continues into 2025, with a slight increase to 5.46 in June and a further increase to 5.89 in December.

Relationship to Revenue

The fluctuations in the receivables turnover ratio do not appear to have a consistently direct correlation with revenue changes. While revenue generally increased from September 2020 to September 2022, the receivables turnover ratio experienced both increases and decreases during this period. The significant revenue decrease in the first half of 2023 coincided with a temporary increase in the receivables turnover ratio, suggesting a more efficient collection of receivables during that period of lower sales.

In conclusion, the receivables turnover ratio demonstrates a dynamic pattern, influenced by factors beyond simple revenue growth. Further investigation into credit policies, collection efforts, and customer payment terms would be necessary to fully understand the drivers behind these fluctuations.

The payables turnover ratio for the analyzed period demonstrates considerable fluctuation, though generally trending downwards over the long term. Initial values indicate a relatively stable turnover, followed by a period of increase, then a decline, and finally a recent stabilization with some volatility. A closer examination reveals distinct phases in the company’s payment practices.

Initial Stability & Increase (Sep 27, 2020 – Sep 26, 2021)

The payables turnover ratio began at 8.94 and exhibited minor fluctuations, reaching 10.12 by September 2021. This suggests a consistent and efficient management of trade accounts payable during this period, with the company paying its suppliers relatively quickly. The slight increase indicates a potential tightening of payment terms or increased purchasing activity relative to payables.

Decline & Volatility (Dec 26, 2021 – Jun 26, 2022)

From December 2021, the ratio experienced a decline to 8.52 by September 2022, with a notable spike to 11.33 in December 2022. This period suggests a shift in payment behavior, potentially due to changes in supplier relationships, inventory management, or cash flow constraints. The December 2022 peak could be attributed to a deliberate effort to reduce payables before year-end.

Significant Increase & Subsequent Moderation (Mar 27, 2022 – Sep 24, 2023)

A substantial increase in payables turnover was observed, peaking at 20.50 in March 2023. This indicates a significantly accelerated rate of paying suppliers. However, this was followed by a decrease to 15.69 by December 2023 and 14.24 by March 2024, suggesting the initial acceleration was not sustained. This could be due to a temporary surge in available cash or a strategic decision to take advantage of early payment discounts.

Recent Trend (Jun 25, 2023 – Dec 29, 2024)

The ratio continued to decline, reaching a low of 10.33 in December 2024. This suggests a lengthening of the payment cycle, potentially indicating a deliberate strategy to conserve cash or negotiate extended payment terms with suppliers. The decline is relatively gradual compared to the earlier fluctuations.

Latest Period (Mar 30, 2025 – Jun 29, 2025)

The most recent two periods show a slight increase, reaching 11.07 and 11.50. While a minor uptick, it does not negate the overall downward trend observed over the past two years. This could be a temporary fluctuation or the beginning of a new trend that requires further monitoring.

Overall, the payables turnover ratio demonstrates a complex pattern. While initially stable and increasing, it has generally trended downwards, with periods of significant volatility. The company’s ability to consistently maintain a high turnover ratio has diminished over time, suggesting a potential shift in its financial strategy or operating environment. Continued monitoring of this ratio is recommended to understand the underlying drivers of these changes and their impact on the company’s financial health.

The working capital turnover ratio for the analyzed period demonstrates a generally increasing trend, punctuated by some fluctuations. Initially, the ratio exhibits growth from 1.41 to 2.04 over the first five quarters. A slight decrease to 2.01 is then observed, followed by a peak of 2.32 before reaching 2.63 in the final quarter presented.

Initial Growth Phase (Sep 27, 2020 – Sep 26, 2021)

From September 2020 through September 2021, the working capital turnover ratio increased from 1.41 to 2.04. This indicates improving efficiency in utilizing working capital to generate revenue. The increase suggests the company was becoming more effective at managing its current assets and liabilities in relation to its sales.

Fluctuation and Subsequent Increase (Dec 26, 2021 – Jun 25, 2023)

Following the peak in September 2021, the ratio experienced a minor decline to 2.01 in December 2021. It then continued to rise, reaching 2.32 in June 2023. However, a subsequent decrease to 1.93 was noted, suggesting a temporary slowdown in the efficiency of working capital utilization. This period demonstrates some volatility, but overall maintains a relatively high level of turnover.

Recent Trend (Sep 24, 2023 – Dec 29, 2024)

From September 2023 through December 2024, the ratio decreased from 1.81 to 1.96. This suggests a slight decrease in the efficiency of working capital utilization during this period. However, the ratio remains above the initial value observed in September 2020.

Final Increase (Mar 30, 2025 – Dec 28, 2025)

The final quarters show a significant increase in the working capital turnover ratio, rising from 2.15 to 2.63. This represents the highest level of efficiency observed throughout the analyzed period, indicating a substantial improvement in the company’s ability to generate revenue from its working capital.

Overall, the trend suggests a strengthening ability to convert working capital into sales. The fluctuations observed may be attributable to seasonal variations in the business, changes in credit policies, or shifts in inventory management practices. The substantial increase in the final quarters warrants further investigation to understand the underlying drivers of this improved performance.

The average inventory processing period exhibited a clear trend over the observed timeframe. Initially, the period remained relatively stable, followed by a sustained increase, and then a more recent decline. A detailed examination reveals a shift in the efficiency of inventory management.

Initial Stability (Sep 27, 2020 – Jun 27, 2021)

From September 2020 through June 2021, the average inventory processing period fluctuated within a narrow range, between 124 and 135 days. This suggests a consistent, albeit somewhat lengthy, time required to convert inventory into sales during this period. The slight decrease from 132 days in September 2020 to 126 days in June 2021 could indicate minor improvements in inventory management practices.

Prolonged Increase (Sep 26, 2021 – Jun 25, 2023)

Beginning in September 2021, a noticeable upward trend commenced. The average inventory processing period steadily increased from 124 days to 182 days by June 2023. This lengthening period suggests a potential slowdown in sales, an accumulation of inventory, or inefficiencies in the supply chain. The most significant increases occurred between March 2022 (140 days) and December 2022 (169 days), and again between March 2023 (171 days) and June 2023 (182 days).

Recent Decline (Sep 24, 2023 – Jun 29, 2025)

From September 2023 onwards, the average inventory processing period began to decrease. By June 2025, it had fallen to 166 days, representing a reduction from the peak of 208 days in March 2024. This recent decline indicates a potential improvement in inventory turnover, possibly due to increased sales, more effective inventory control measures, or a streamlined supply chain. The rate of decline appears to be accelerating, moving from 198 days in September 2023 to 151 days in September 2025.

Correlation with Inventory Turnover

The observed trends in the average inventory processing period are inversely correlated with the inventory turnover ratio. As the processing period increased from 2021 to 2023, the inventory turnover ratio decreased, and as the processing period decreased from 2023 to 2025, the inventory turnover ratio increased. This confirms the relationship between the two metrics and supports the interpretation of the observed changes.

In summary, the company experienced a period of stable inventory processing times, followed by a significant lengthening of the period, and then a recent improvement. The recent decline in the average inventory processing period, coupled with the increasing inventory turnover ratio, suggests a positive shift in inventory management efficiency.

The average receivable collection period exhibited fluctuations over the observed timeframe, generally trending downwards before stabilizing in recent periods. Initial values indicated a period of 77 days, followed by an increase to 89 days. Subsequent quarters saw a return to 77 days and a slight decrease to 76 days.

Initial Period (Sep 27, 2020 – Jun 27, 2021)

The average collection period demonstrated initial stability around 77-79 days, with a peak of 89 days in December 2020. This suggests potential variations in sales terms or collection efficiency during that specific quarter. The subsequent return to the 77-79 day range indicates a possible correction or normalization of collection practices.

Period of Increase (Sep 26, 2021 – Jun 26, 2022)

A noticeable increase in the average collection period is observed, rising from 75 days to a high of 93 days. This lengthening period could be attributed to factors such as extended credit terms offered to customers, a shift in the customer mix towards those with slower payment habits, or a decline in the effectiveness of collection efforts. The peak of 93 days in September 2022 warrants further investigation.

Subsequent Decline and Stabilization (Mar 27, 2022 – Dec 28, 2025)

Following the peak, the average collection period generally decreased, reaching a low of 56 days in March 2023. This suggests successful implementation of strategies to improve collection efficiency or a return to more standard payment terms. From March 2023 through December 2025, the period stabilized, fluctuating between 56 and 74 days, indicating a consistent collection process. The most recent values, between 67 and 62 days, suggest continued efficient management of receivables.

Recent Trends (Sep 29, 2024 – Dec 28, 2025)

The final eight quarters show a relatively narrow range, between 62 and 74 days. This indicates a stable and predictable collection cycle. The slight fluctuations within this range are likely normal variations and do not suggest any significant underlying issues.

Overall, the average receivable collection period demonstrates a dynamic pattern, with an initial period of stability, a subsequent increase, and a final period of decline and stabilization. The recent stabilization suggests effective management of accounts receivable.

The operating cycle, along with its component parts – average inventory processing period and average receivable collection period – exhibits notable fluctuations over the observed timeframe. An overall lengthening of the operating cycle is apparent, though not consistently linear, with periods of contraction interspersed.

Average Inventory Processing Period

The average inventory processing period demonstrates a clear upward trend throughout the majority of the analyzed period. Starting at 132 days in September 2020, it generally increased, reaching 208 days in March 2024. A slight decrease is then observed in subsequent quarters, falling to 183 days by March 2025. This suggests a growing inefficiency in managing inventory, potentially indicating increased holding costs or obsolescence risk, before a recent partial correction. The most significant increases occurred between June 2022 and December 2023.

Average Receivable Collection Period

The average receivable collection period displays more variability than the inventory processing period. It fluctuated between 75 and 93 days for much of the period, with no strong directional trend until late 2023. From December 2023 onward, a consistent downward trend is observed, decreasing from 69 days to 62 days in March 2025. This indicates improving efficiency in collecting receivables, potentially due to stricter credit policies or more effective collection efforts. Earlier fluctuations suggest potential inconsistencies in customer payment behavior or changes in credit terms.

Operating Cycle

The operating cycle, calculated as the sum of the inventory processing and receivable collection periods, generally increased from 209 days in September 2020 to a peak of 275 days in September 2023. The increase was largely driven by the lengthening inventory processing period. Following September 2023, the operating cycle decreased, reaching 252 days in March 2025, primarily due to the reduction in the receivable collection period. The cycle peaked in the September 2023 timeframe, indicating the longest time required to convert inventory into cash. The recent decline suggests improved working capital management, but the cycle remains significantly longer than its initial value.

In summary, the company experienced a prolonged increase in the time it takes to process inventory, contributing to a lengthening of the overall operating cycle. More recently, improvements in receivable collection have partially offset this effect, leading to a modest decrease in the operating cycle. Continued monitoring of these trends is recommended to assess the sustainability of the recent improvements and to identify potential areas for further optimization.

The average payables payment period exhibited considerable fluctuation over the observed period, spanning from September 2020 to December 2025. Initially, the period remained stable before demonstrating a marked decrease, followed by a period of increased variability and a subsequent stabilization towards the end of the analyzed timeframe.

Initial Stability (Sep 27, 2020 – Dec 27, 2020)

The average payables payment period began at 41 days and remained consistent through the end of 2020, indicating a stable approach to settling obligations with suppliers during this period.

Decreasing Trend (Mar 28, 2021 – Jun 27, 2021)

A downward trend was observed in the first half of 2021, with the payment period decreasing from 39 days to 36 days. This suggests an improvement in the company’s efficiency in paying its suppliers, potentially due to negotiated terms or improved cash flow management.

Fluctuation and Increase (Sep 26, 2021 – Mar 27, 2022)

Following the initial decrease, the payment period fluctuated, increasing to 39 days by December 2021 and then to 41 days by March 2022. This variability could be attributed to changes in supplier terms, seasonal fluctuations in purchasing, or shifts in the timing of invoice payments.

Significant Decrease and Subsequent Variability (Mar 27, 2022 – Sep 24, 2023)

A substantial decrease in the average payables payment period occurred between March 2022 and March 2023, falling from 41 days to a low of 21 days. This was followed by a period of fluctuation, ranging from 22 to 26 days through September 2023. The initial sharp decline suggests a significant improvement in payment efficiency, while the subsequent variability indicates potential inconsistencies in payment practices.

Stabilization and Gradual Increase (Dec 24, 2023 – Dec 29, 2024)

The period stabilized somewhat in late 2023 and throughout 2024, generally remaining between 29 and 35 days. A gradual increasing trend was observed towards the end of 2024, reaching 35 days in December.

Recent Trend (Mar 30, 2025 – Dec 28, 2025)

The most recent measurements indicate a slight decrease to 33 days in March 2025, followed by an increase to 36 days in September 2025, and a final measurement of 36 days in December 2025. This suggests a potential stabilization around the 36-day mark, though continued monitoring is warranted.

Overall, the average payables payment period demonstrated a dynamic pattern over the analyzed period. While periods of stability and improvement were observed, fluctuations suggest the company’s payment practices are subject to external factors or internal operational changes. The recent trend indicates a potential stabilization, but ongoing monitoring is recommended to assess the sustainability of this pattern.

The cash conversion cycle exhibited a generally increasing trend over the observed period, although with notable fluctuations. Initially, the cycle ranged between 168 and 183 days. A period of relative stability followed, before a marked increase began in the latter half of 2021 and continued through much of 2023. More recently, the cycle has shown signs of contraction, though it remains elevated compared to earlier periods.

Average Inventory Processing Period

The average inventory processing period demonstrated a consistent upward trend throughout the analyzed timeframe. Starting at 132 days in September 2020, it steadily increased, reaching 208 days in March 2024. A slight decrease was observed in subsequent quarters, falling to 183 days by March 2025. This suggests a lengthening of the time required to convert raw materials into finished goods and ultimately sell them.

Average Receivable Collection Period

The average receivable collection period displayed more variability. It initially fluctuated between 77 and 89 days before stabilizing around 75-81 days through late 2021. A subsequent increase occurred, peaking at 93 days in September 2022. The period then decreased significantly, reaching a low of 59 days in June 2023, before stabilizing in the 60-74 day range through the end of the observation period. This indicates changes in the efficiency of collecting payments from customers.

Average Payables Payment Period

The average payables payment period generally trended upwards, but with less pronounced changes than the other two components. It remained relatively stable in the 39-41 day range for the first seven quarters. A notable decrease occurred in March 2022, falling to 21 days, before gradually increasing to 36 days by June 2025. This suggests a shifting strategy in managing payments to suppliers.

The increasing inventory processing period appears to be the primary driver of the overall lengthening of the cash conversion cycle for much of the period. While improvements in receivable collection and payables management offered some offsetting effects, they were insufficient to counteract the impact of slower inventory turnover. The recent contraction in the cash conversion cycle, observed in the latest quarters, is attributable to a combination of a slight decrease in the inventory processing period and stabilization in the receivable collection period.

The fluctuations observed in these ratios suggest potential shifts in operational strategies, supply chain dynamics, or customer payment behaviors. Further investigation into the underlying causes of these trends would be beneficial for informed decision-making.