NXP Semiconductors N.V. (NASDAQ:NXPI)

Inventory Turnover

The inventory turnover ratio was approximately stable around 4.25 to 4.32 during early 2021; however, it showed a gradual decline through 2022, decreasing from 4.2 to 3.69 by the third quarter of 2022. This suggests a slower rate of inventory movement in more recent quarters, potentially indicating either increased inventory levels or reduced sales velocity.

Receivables Turnover

The receivables turnover ratio declined from 11.26 in the first quarter of 2021 to a low of 10.03 by the third quarter of 2021, then reversed to steadily increase again, reaching a peak of 12.58 in the second quarter of 2022 before a slight dip to 12.4. This pattern indicates an initial slowdown in collecting receivables followed by an improvement, implying enhanced efficiency in managing accounts receivable in mid-2022.

Payables Turnover

The payables turnover was relatively stable at 4.42 during early 2021 but declined gradually through to 3.69 by mid-2022. This decline may reflect longer payment terms taken by the company, indicating either extended supplier credit or a slower payment cycle.

Working Capital Turnover

The working capital turnover ratio experienced significant fluctuations, peaking sharply at 8.21 in the last quarter of 2021 before falling back to 3.65 by mid-2022. This volatility suggests changing efficiency in the use of working capital, with an exceptional spike pointing to possible operational or timing anomalies in that quarter followed by normalization.

Average Inventory Processing Period

The average number of days to process inventory fluctuated mildly between 84 and 88 from early to late 2021, then increased steadily to 99 days by mid-2022. This increasing trend aligns with the declining inventory turnover ratio and indicates slower inventory movement or longer holding periods.

Average Receivable Collection Period

This period saw slight variations: starting at 32 days in early 2021, rising to 36 days by the third quarter of 2021, then decreasing steadily to 29 days in the most recent quarters. The improvement in receivable collection times towards 2022 supports the increasing receivables turnover ratio.

Operating Cycle

The operating cycle remained somewhat stable around 117 to 122 days, reaching its highest at 128 days in the third quarter of 2022. Although relatively steady, the slight increase indicates a modest elongation of the total time taken from inventory purchase to cash collection.

Average Payables Payment Period

The average number of days to pay suppliers lengthened consistently from 83 days in early 2021 to 99 days by mid-2022. This elongation suggests the company has extended its payment terms or delayed payments, which might be a cash management strategy.

Cash Conversion Cycle

The cash conversion cycle exhibited a decreasing trend from 35 days in the first quarter of 2021 down to a low of 25 days in the second quarter of 2022, followed by a slight increase to 29 days. This overall decline indicates improved efficiency in the company’s cash flow management, reducing the time needed to convert resources invested in production back to cash.

The financial data indicates several key trends regarding cost of revenue, inventories, and inventory turnover over the examined periods.

Cost of Revenue

The cost of revenue demonstrates an overall upward trend from March 2020 to July 2022. Starting at 1,024 million USD in March 2020, the cost initially decreased slightly to 957 million USD in June 2020, but then increased steadily across the subsequent quarters, reaching 1,430 million USD by July 2022. This steady increase suggests rising expenses associated with the production or procurement of goods over this period.

Inventories, Net

Inventories experienced a moderate decline in the first half of the period, dropping from 1,227 million USD in March 2020 to 1,030 million USD in December 2020. However, starting from April 2021, inventory levels have increased consistently, rising from 1,056 million USD to 1,462 million USD by July 2022. This upward trajectory indicates a build-up of inventory, which might reflect higher production, anticipation of increased sales demand, or potential challenges in inventory turnover.

Inventory Turnover

Inventory turnover ratios are only available for periods starting December 2020. The turnover ratio remains relatively stable around 4.2 from December 2020 through April 2022 but shows a gradual decline thereafter, dropping from 4.20 in April 2022 to 3.69 in July 2022. This decrease in turnover suggests that inventory is being sold or used less frequently, which could be indicative of slowing sales or increasing inventory accumulation.

Overall, the data reveals an increasing cost of revenue and inventory accumulation accompanied by a modest decline in inventory turnover towards the most recent period. This combination suggests that while the company is incurring higher costs and holding more inventory, the efficiency with which inventory is converted into sales may be decreasing slightly, warranting further evaluation of inventory management and sales trends.

Revenue Trends

Revenue demonstrates an overall upward trajectory from March 29, 2020, to July 3, 2022. Initial revenue was recorded at $2,021 million, followed by a decline to $1,817 million in June 28, 2020. After this dip, revenue consistently increased each quarter, reaching $3,312 million by July 3, 2022. This represents a significant growth, indicating improving sales performance over the observed period.

Accounts Receivables, Net

Accounts receivables show some fluctuations throughout the period. Starting at $616 million in March 29, 2020, the figure dipped to $481 million by June 28, 2020, then rose significantly to a high of $991 million in July 4, 2021. Post that peak, there is a slight decline and stabilization around the $925 to $996 million range between April 3, 2022, and July 3, 2022. The upward trend in receivables suggests increasing credit sales and possibly extended payment terms or customer base growth.

Receivables Turnover Ratio

The receivables turnover ratio data is partially available starting from December 31, 2020, with a ratio of 11.26. This ratio declines to 10.03 by October 3, 2021, indicating a slower collection pace. However, it improves thereafter, reaching 12.58 on April 3, 2022, before a slight decrease to 12.4 on July 3, 2022. The increase in turnover ratio during early 2022 signals more efficient collection efforts or stronger cash conversion from sales.

Summary Insights

The company's revenue growth is robust and strong over the analyzed quarters, reflecting improving market conditions or expanded operations. The growth in accounts receivables aligns with increased sales volumes but also raises attention toward managing credit risk. The receivables turnover ratio's recent improvement suggests enhanced collection efficiency, helping to mitigate the risk associated with higher receivables balances. Overall, financial dynamics point to a healthy operational expansion alongside a generally effective working capital management strategy.

The analysis of the quarterly financial data reveals various trends in the cost of revenue, accounts payable, and payables turnover for the company over the specified periods.

Cost of Revenue

The cost of revenue demonstrates a generally increasing trend from March 2020 through July 2022. It began at US$1,024 million in March 2020, experienced a slight decrease to US$957 million in June 2020, and then rose steadily to reach US$1,430 million by July 2022. This represents an overall increase of approximately 40% over the observed timeframe, indicating rising expenses related to goods sold or services provided.

Accounts Payable

The accounts payable balance also shows an upward trajectory over the quarters. Starting at US$895 million in March 2020, the figure fluctuated slightly in the first few quarters but increased consistently from late 2020 onwards. By July 2022, accounts payable had grown to US$1,462 million, marking a substantial rise of over 63%. This pattern suggests extended credit terms from suppliers or increased purchase volumes.

Payables Turnover Ratio

The payables turnover ratio remained stable at 4.42 in December 2020 and April 2021, before gradually declining each quarter to reach 3.69 in July 2022. This decreasing ratio indicates that the company is taking longer to pay its suppliers, possibly as a cash management strategy or due to changing operational dynamics.

In summary, both cost of revenue and accounts payable have steadily increased, while the payables turnover ratio shows a slight decreasing trend. This combination suggests rising operational costs accompanied by a slower payment cycle to creditors. These patterns may reflect growth-related expenses and a strategic approach to managing working capital.

The analysis of the quarterly financial data indicates several noteworthy trends regarding working capital, revenue, and working capital turnover ratios over the examined periods.

Working Capital

Working capital exhibited fluctuations throughout the quarters, beginning at 1,418 million USD and generally trending upwards with intermittent declines. It reached several peaks, including 2,955 million USD in July 2021 and 3,379 million USD in July 2022. Some notable decreases occurred in October 2021, where it dropped to 1,283 million USD, and in April 2021, where it fell to 1,759 million USD. Overall, despite these fluctuations, there was a positive upward trend in working capital over the two-year span.

Revenue

Revenue showed a consistent and steady increase across the quarters, rising from 2,021 million USD in March 2020 to 3,312 million USD in July 2022. This growth demonstrates strengthening sales performance and successful revenue generation strategies over the observed periods. There were no recorded declines, indicating resilience or growth in the company's sales activities, with incremental increases each quarter.

Working Capital Turnover

Working capital turnover ratios, available from December 2020 onward, showed significant variability. The ratio peaked at 8.21 in December 2021, signifying efficient use of working capital relative to revenue in that quarter. However, other quarters such as July 2021 and April 2022 registered lower ratios of around 3.36 and 3.65 respectively, illustrating less efficient utilization. The fluctuating turnover ratio suggests periodic changes in working capital management effectiveness or shifts in operational dynamics.

In summary, revenue consistently increased, indicating positive business momentum, while working capital levels varied but generally grew, reflecting possibly expanding operational scale or inventory and receivables changes. The working capital turnover ratio's volatility suggests that while revenue management improved, efficiency in managing resources relative to sales was inconsistent during periods analyzed. Further investigation into the causes of working capital fluctuations and turnover efficiency would be beneficial to optimize financial performance.

Inventory Turnover

The inventory turnover ratio exhibits a declining trend over the observed periods, starting from 4.25 in April 2021 and decreasing progressively to 3.69 by July 2022. This downward movement indicates that the frequency at which inventory is sold and replaced has slowed, suggesting potentially lower sales velocity or increased inventory levels relative to sales.

Average Inventory Processing Period

The average inventory processing period shows an increasing tendency over the same timeframe, rising from 86 days in April 2021 to 99 days in July 2022. This indicates that inventory remains in stock for longer durations before being converted into sales, which aligns inversely with the declining inventory turnover ratio.

Overall Trends and Insights

The simultaneous decrease in inventory turnover and increase in the average inventory processing period suggest a shift toward slower inventory movement. This pattern may point to supply chain challenges, demand fluctuations, or potential inefficiencies in inventory management. Continuous monitoring and investigation into the causes of these trends would be advisable to optimize inventory levels and improve turnover efficiency.

Receivables Turnover

The receivables turnover ratio shows a generally positive trend over the observed periods starting from March 29, 2020 to July 3, 2022. Initially, data for early 2020 periods are not available. From December 31, 2020 onward, the ratio begins at 11.26 and experiences a slight decline reaching 10.03 by October 3, 2021. After that point, it improves consistently, reaching a peak of 12.58 in July 3, 2022, followed by a slight decrease to 12.4 in the same quarter. This indicates an overall improvement in the efficiency of converting receivables into cash over time, especially in the latter part of the timeline.

Average Receivable Collection Period

The average collection period, expressed in days, mirrors the inverse of the receivables turnover trend, indicating the number of days it takes to collect receivables. Starting at 32 days on December 31, 2020, this period slightly increases to 36 days by October 3, 2021, suggesting a temporary slowdown in collections. Subsequently, there is a noticeable improvement as the collection period decreases to 29 days by the second quarter of 2022, reflecting enhanced efficiency in receivables management and faster collection cycles.

Average Inventory Processing Period

The average inventory processing period demonstrates a gradual increasing trend from the earliest available data. Starting at 86 days in April 2021, the period fluctuates slightly around the mid to high 80s throughout 2021, before extending notably to 93 days in July 2022 and further to 99 days by the most recent quarter. This suggests a lengthening duration for inventory turnover, indicating either slower movement of inventory or increased inventory holdings over time.

Average Receivable Collection Period

The average receivable collection period shows a generally stable to slightly decreasing pattern over the observed quarters. Beginning at 32 days in April 2021, it rises marginally to 36 days in October 2021 but then declines steadily to 29 days by July 2022. This decrease could imply an improvement in the company's efficiency in collecting receivables or more stringent credit terms with customers.

Operating Cycle

The operating cycle, which represents the total time from inventory acquisition to cash collection from sales, displays a modest upward trend overall. It starts at 118 days in April 2021, fluctuates slightly within a narrow range during 2021, and rises from 117 days in April 2022 to 128 days by July 2022. The increase aligns with the lengthening inventory processing period and indicates a longer timeframe required to complete the company's operating activities and convert inputs into cash flows.

The analysis of the available quarterly financial data reveals notable trends in the payables turnover ratio and the average payables payment period over the periods from the end of 2020 through mid-2022.

Payables Turnover Ratio

The payables turnover ratio exhibits a downward trend from 4.42 in both April and July 2021 to 3.69 by July 2022. This gradual decrease suggests that the company is paying its suppliers less frequently over time, indicating a potential lengthening of payment terms or a change in payment policies. Specifically, the ratio fell from 4.42 (April and July 2021) to 4.1 (October 2021), fluctuated slightly to 4.28 (December 2021), then steadily declined through 3.99 (April 2022), 3.76 (July 2022), and finally to 3.69 (July 2022).

Average Payables Payment Period

Consistent with the payables turnover ratio trend, the average payables payment period increased steadily during the same timeframe. Starting from 83 days in April and July 2021, it rose to 89 days in October 2021, briefly decreased to 85 days in December 2021, and then continued its upward trajectory to 91 days in April 2022, 97 days in July 2022, and 99 days in July 2022. This pattern indicates that the company is taking longer to settle its accounts payable, which may improve short-term cash flow but could affect supplier relationships.

Overall, the data suggest a strategic shift towards longer payment terms or slower payments to suppliers across the observed periods. This extension of payment duration is reflected inversely in the ratio decreasing and directly in the average days increasing. Stakeholders should consider these trends in relation to working capital management and potential impacts on supplier negotiations and credit terms.

The analysis of the quarterly financial metrics reveals distinct trends in the company's working capital management over the periods observed.

Average Inventory Processing Period

This metric shows a generally increasing trend from 86 days in April 2021 to 99 days in July 2022. After a slight decline from 88 days in December 2020 to 84 days in June 2021, the inventory processing period lengthened steadily, indicating that the company is holding inventory for longer durations as time progresses.

Average Receivable Collection Period

The receivable collection period fluctuated modestly but generally decreased over time. Starting from 33 days in June 2020, it peaked to 36 days in October 2021 and then declined to 29 days by July 2022, suggesting improvement in the efficiency of collecting receivables.

Average Payables Payment Period

The payables payment period increased notably from 83 days in April 2021 to 99 days in July 2022, with some oscillations in between. This elongation indicates that the company is taking longer to settle its payables.

Cash Conversion Cycle

The cash conversion cycle remained relatively stable with minor fluctuations, peaking at 37 days in December 2020 and reaching its lowest at 25 days in July 2022. It generally shows a slight downward trend, reflecting an overall improvement in the efficiency of converting investments in inventory and other resources into cash flows from sales.

In summary, while the company holds inventory for longer periods and extends its payables duration, it demonstrates improved efficiency in receivables collection and overall cash conversion cycle. This mixed pattern may indicate strategic management of working capital to optimize cash flow and operational efficiency.