Monolithic Power Systems Inc. (NASDAQ:MPWR)

The financial ratios and periods under review exhibit notable fluctuations and trends across the observed years. Key operational efficiency metrics such as inventory turnover, receivables turnover, and payables turnover have demonstrated variable patterns, reflecting changing management and market conditions.

Inventory turnover

There is a decline from 2.41 in 2020 to a trough of 1.67 in 2022, followed by a recovery to 2.35 by 2024. This indicates that the speed at which inventory is sold and replaced slowed substantially by 2022 but improved thereafter, potentially pointing to adjustments in inventory management or demand fluctuations.

Receivables turnover

This ratio decreases steadily from 12.63 in 2020 to 9.82 in 2022, suggesting that the company’s efficiency in collecting receivables diminished during this period. However, it rebounds strongly to 12.79 by 2024, indicating enhanced credit management or improved cash collections.

Payables turnover

The payables turnover shows considerable volatility, declining sharply from 9.92 in 2020 to 6.29 in 2021, then increasing to a peak of 12.71 in 2023, before retreating again to 9.62 in 2024. This variability reflects changing payment practices and supplier relationship dynamics, with periods of slower and faster payment cycles.

Working capital turnover

This ratio generally trends upward, moving from 1.21 in 2020 to 1.74 in 2024, after a dip to 1.15 in 2023. The general increase indicates improved utilization of working capital to generate sales, despite some fluctuations.

Average inventory processing period

The number of days inventory is held lengthens significantly from 151 days in 2020 to 219 days in 2022, signaling slower inventory movement, then shortens to 155 days by 2024, reflecting better inventory management or faster turnover after 2022.

Average receivable collection period

This period extends from 29 days in 2020 to a peak of 37 days in 2022, indicating slower collections, then returns to 29 days in 2024, projecting recovery in the efficiency of collecting receivables.

Operating cycle

The operating cycle increases from 180 days in 2020 to 256 days in 2022, followed by a reduction to 184 days in 2024. The lengthening cycle corresponds with slower inventory turnover and receivables collection in the earlier years, which gradually improves toward the end of the period.

Average payables payment period

The payment period rises from 37 days in 2020 to 58 days in 2021, then contracts to around 29-30 days in 2022 and 2023, before increasing again to 38 days in 2024. This pattern denotes shifting supplier payment terms and possibly changing liquidity management strategies.

Cash conversion cycle

The cash conversion cycle extends from 143 days in 2020 to a peak of 226 days in 2022, indicating a longer duration to convert investments in inventory and receivables into cash. It subsequently shortens to 146 days in 2024, reflecting improved operational efficiency and quicker cash flow recovery by the end of the period.

Overall, the data reveals a period of declining operational efficiency reaching a low point approximately in 2022, characterized by slower inventory turnover, receivables collection, and an extended cash conversion cycle. However, a recovery phase is evident post-2022, with improving turnover ratios and reduced cycle periods, signaling a restoration of more effective asset utilization and liquidity management.

The financial data reveals notable trends in the cost of revenue, inventories, and inventory turnover over the five-year period under review.

Cost of Revenue

The cost of revenue exhibits a consistent upward trajectory throughout the period. Starting at 378,498 thousand US dollars in the year ending December 31, 2020, it increased substantially each year, reaching 986,230 thousand US dollars by the end of 2024. This represents more than a twofold increase over five years, indicating a significant expansion in the scale of operations or cost pressures that the company may be experiencing.

Inventories

Inventories also demonstrate growth, rising from 157,062 thousand US dollars in 2020 to 419,611 thousand US dollars in 2024. The increase is particularly steep between 2020 and 2022, moving from 157,062 to 447,290 thousand US dollars, followed by a slight decrease in 2023 to 383,702 thousand US dollars, and a subsequent increase in 2024. The initial sharp growth suggests accumulation or buildup of inventory, while the decline in 2023 followed by recovery could indicate adjustments in inventory management practices or response to demand fluctuations.

Inventory Turnover

The inventory turnover ratio shows a declining trend from 2.41 in 2020 to a low of 1.67 in 2022, implying that inventory was being sold or used less frequently during this period. However, the ratio improves starting in 2023, increasing to 2.08, and then further to 2.35 by 2024. This improvement signals better inventory management efficiency or stronger sales relative to inventory levels in the latter years.

In summary, while the cost of revenue and inventories have generally increased substantially over the five-year horizon, the inventory turnover trend points to an initial period of reduced inventory efficiency followed by a recovery toward more effective management or sales operations. This combination suggests the company experienced both growth and operational adjustments during the timeframe under consideration.

The financial data reveals a consistent upward trajectory in revenue over the five-year period. Starting at approximately $844 million in 2020, revenue rose markedly each year, reaching about $2.21 billion by the end of 2024. This reflects a significant expansion in the company's sales or service income streams.

Accounts receivable, net, increased substantially from roughly $67 million in 2020 to around $183 million in 2022, followed by a slight decrease over the subsequent two years, settling at approximately $173 million by 2024. The initial growth in receivables aligns with the rising revenue, suggesting increased credit sales. The modest decline in the last two years may indicate improved collection efforts or changes in sales terms.

The receivables turnover ratio exhibits variability over the years, starting at 12.63 in 2020 and decreasing to a low of 9.82 by 2022. A slight recovery occurred thereafter, with the ratio climbing back to 12.79 by 2024. This ratio reflects how efficiently the company collects its receivables; the decline implies a slower collection process or extended credit terms around 2022, whereas the rebound suggests enhanced efficiency in receivables management towards 2024.

Revenue Growth

Steady and substantial increase over five years, nearly tripling from 2020 to 2024.

Accounts Receivable Movement

Marked increase until 2022, followed by moderate reductions, potentially indicating improved collections or strategic adjustments in credit policy.

Receivables Turnover Ratio

Fluctuations point to changes in collection efficiency, with decreased turnover in the middle years and recovery in the latest period.

Cost of Revenue

There has been a consistent increase in the cost of revenue over the five-year period. Starting from approximately $378.5 million in 2020, the cost rose every year, reaching nearly $986.2 million by 2024. The growth trend indicates expanding operations or increased expenses related to production or sales.

Accounts Payable

The accounts payable values exhibit some fluctuations over the years. From about $38.2 million in 2020, there was a marked increase to $83 million in 2021. However, this figure decreased to approximately $61.5 million in 2022, then slightly increased to $62.96 million in 2023 before reaching a higher value of $102.5 million in 2024. These changes suggest variability in the timing or volume of outstanding payables.

Payables Turnover Ratio

The payables turnover ratio shows notable variability, starting at 9.92 in 2020, declining to 6.29 in 2021, then experiencing a significant rise to 12.13 in 2022 and a slight increase to 12.71 in 2023, followed by a decrease to 9.62 in 2024. This pattern indicates changes in how quickly the company is paying its suppliers, with faster payment periods in 2022 and 2023 compared to 2021 and 2024.

Working Capital

The working capital has shown a consistent increase from 2020 through 2023, rising from approximately 695 million US dollars to nearly 1.58 billion US dollars. However, in 2024, there is a noticeable decline to about 1.27 billion US dollars. This trend indicates strong growth in liquidity and operational efficiency until 2023, followed by a contraction in the most recent year.

Revenue

Revenue has demonstrated a steady upward trajectory across the five-year span. Beginning at 844 million US dollars in 2020, it increased significantly each year, reaching over 2.2 billion US dollars by the end of 2024. This steady growth reflects successful sales expansion and possible market penetration.

Working Capital Turnover

The working capital turnover ratio displays some variability. It improved from 1.21 in 2020 to a peak of 1.56 in 2022, suggesting increased efficiency in utilizing working capital to generate revenue. However, in 2023, the ratio declined to 1.15, indicating a reduction in efficiency despite higher revenue figures. By 2024, the ratio rebounded to 1.74, the highest point in the period, implying enhanced efficiency and possibly optimized working capital management.

Summary of Trends

Overall, the data reflects growing revenues alongside increasing working capital until 2023. The drop in working capital in 2024 contrasts with continued revenue growth, while the working capital turnover ratio fluctuations suggest periods of varying capital efficiency. The notable decrease in working capital in 2024 combined with the improved turnover ratio could indicate a strategic shift in managing short-term assets and liabilities to support revenue growth more effectively. These dynamics warrant further examination to understand the underlying operational or financial decisions contributing to these changes.

Inventory Turnover

The inventory turnover ratio shows a declining trend from 2.41 in 2020 to 1.67 in 2022, indicating a slower rate at which inventory is sold and replaced during this period. However, improvements are noted in the subsequent years, rising to 2.08 in 2023 and further to 2.35 in 2024, suggesting enhanced inventory management or increased sales efficiency towards the end of the observed period.

Average Inventory Processing Period

The average inventory processing period, which is inversely related to inventory turnover, increased significantly from 151 days in 2020 to 219 days in 2022. This reflects a longer time taken to convert inventory into sales, potentially signaling operational or demand challenges. Following 2022, the period decreased notably to 175 days in 2023 and further to 155 days in 2024, aligning with the improvement seen in inventory turnover and indicating more efficient inventory clearance and turnover in the later years.

Overall Analysis

The data illustrates a period of inventory management deterioration from 2020 to 2022, characterized by lower turnover and extended processing periods. From 2023 onwards, the company appears to have implemented effective strategies that reversed these trends, resulting in improved inventory turnover ratios and shortened inventory processing periods. This suggests enhanced operational efficiency and possibly stronger sales performance in the most recent years under review.

The financial data displays trends in the company's receivables management over a five-year period. Two key metrics are presented: receivables turnover ratio and average receivable collection period in days.

Receivables Turnover Ratio

The ratio shows a downward trend from 12.63 in 2020 to its lowest point at 9.82 in 2022, indicating that the company collected receivables more slowly or extended more credit over this period. In 2023, the ratio saw a slight improvement to 10.13, followed by a marked increase to 12.79 in 2024, surpassing the initial value in 2020. This suggests enhanced efficiency in collection or a tightening of credit terms towards the end of the period.

Average Receivable Collection Period

The average collection period increased from 29 days in 2020 to 32 days in 2021, reaching a peak of 37 days in 2022. This rise aligns with the decrease in receivables turnover, confirming slower collection during these years. In 2023, the collection period slightly decreased to 36 days and then notably dropped back to 29 days in 2024, reflecting an acceleration in receivables collection consistent with the receivables turnover improvement.

Overall, the company experienced a deterioration in receivables efficiency during 2021 and 2022, which subsequently reversed in 2023 and 2024, resulting in better management of receivables and potentially improved cash flow by the end of the observed timeframe.

Average Inventory Processing Period

The average inventory processing period experienced an initial increase from 151 days in 2020 to a peak of 219 days in 2022, indicating a lengthening duration for inventory turnover. However, this trend reversed subsequently, with the period decreasing to 175 days in 2023 and further declining to 155 days in 2024, suggesting improved inventory management and faster processing times towards the end of the observed timeline.

Average Receivable Collection Period

The average receivable collection period showed a gradual increase from 29 days in 2020 to a high of 37 days in 2022, reflecting a longer duration for collecting receivables during this period. This was followed by a marginal reduction to 36 days in 2023 and a more significant decrease back to 29 days in 2024, indicating enhanced efficiency in receivables collection processes.

Operating Cycle

The operating cycle, which combines inventory processing and receivables collection periods, increased from 180 days in 2020 to 256 days in 2022, demonstrating a lengthening time to convert resources into cash. Subsequently, the cycle shortened substantially to 211 days in 2023 and further to 184 days in 2024, reflecting improvements in both inventory turnover and receivables collection, resulting in a more efficient cash conversion process overall.

Payables Turnover

The payables turnover ratio exhibits notable fluctuation over the observed period. It declined from 9.92 in 2020 to 6.29 in 2021, indicating a slower rate of paying off suppliers during that year. However, the ratio then increased sharply to 12.13 in 2022 and slightly further to 12.71 in 2023, suggesting an acceleration in payment frequency. The ratio experienced a decline again in 2024 to 9.62, though it remained higher than the initial values recorded in 2020 and 2021. These variations imply changes in the company's management of accounts payable, with periods of both more extended and accelerated payment cycles.

Average Payables Payment Period

This metric, expressed in days, inversely reflects the trend in payables turnover. The average payment period lengthened significantly from 37 days in 2020 to 58 days in 2021, indicating that the company took longer to settle its payables. Subsequently, there was a sharp reduction to 30 days in 2022 and a further slight decrease to 29 days in 2023, implying improved payment efficiency. In 2024, the period increased again to 38 days, aligning with the decrease in payables turnover. These movements suggest a variability in cash outflow timing to suppliers over the years, with a tendency towards faster payment in the middle years and a partial reversal to longer payment periods by 2024.

Inventory Management

The average inventory processing period exhibited a general upward trend from 151 days in 2020 to a peak of 219 days in 2022. Following that peak, there was a notable reduction to 175 days in 2023 and further improvement to 155 days by 2024. This indicates an initial lengthening of the time inventory is held, followed by an enhancement in inventory turnover efficiency in more recent periods.

Receivables Collection

The average receivable collection period increased steadily from 29 days in 2020 to 37 days in 2022, suggesting customers took longer to settle their invoices. In 2023, this period slightly improved to 36 days and showed a significant reduction to 29 days in 2024, matching the initial 2020 level. This recovery suggests improved credit control or faster collections in the latest period.

Payables Payment

The average payables payment period fluctuated over the years, rising sharply from 37 days in 2020 to a peak of 58 days in 2021. Subsequently, it shortened to 30 days in 2022 and remained stable around 29 days in 2023 before increasing moderately to 38 days in 2024. This variability indicates periodic changes in payment policies or supplier negotiation strategies.

Cash Conversion Cycle

The cash conversion cycle, representing the net time between cash outflow for inventory and inflow from receivables, increased from 143 days in 2020 to 226 days in 2022. This marked lengthening suggests growing working capital tied up in operations during this period. However, it improved considerably to 182 days in 2023 and further reduced to 146 days by 2024, reflecting enhanced operational efficiency and better management of working capital in the latter years.