Palo Alto Networks Inc. (NASDAQ:PANW)

Receivables turnover

The receivables turnover ratio exhibited a general decline from 4.98 in 2019 to a low of 2.57 in 2022, indicating a slower collection of receivables over this period. However, from 2022 onwards, there has been a gradual improvement, with the ratio rising to 3.07 by 2024. This suggests some recovery in efficiency of collecting receivables in the most recent years.

Payables turnover

Payables turnover showed substantial volatility over the time frame. It increased sharply from 11.03 in 2019 to a peak of 22.41 in 2021, implying accelerated payments to suppliers. Following that peak, it declined to 13.43 in 2022 but then increased again to 17.71 by 2024. Overall, payables turnover has trended upward with occasional fluctuations, indicating variable payment behavior.

Working capital turnover

Working capital turnover was reported only for 2019 and 2020, with a decrease from 1.8 to 1.4, signaling a reduction in the efficiency of using working capital to generate revenue during this period. No data is available for subsequent years, preventing further trend analysis.

Average receivable collection period

The average receivable collection period has lengthened significantly from 73 days in 2019 to a peak of 142 days in 2022. It then improved somewhat to 119 days by 2024, yet still remains considerably higher than the initial 2019 figure. This indicates that, on average, it has taken the company longer to collect receivables over the period, although recent years show signs of recovery.

Average payables payment period

The average payables payment period decreased from 33 days in 2019 to 16 days in 2021, suggesting the company was paying its suppliers faster. It then increased to 27 days in 2022 but subsequently shortened again to 21 days in 2024. This pattern reflects variable payment terms, with a general trend towards quicker settlements in recent years compared to the earlier period.

The financial data indicates a consistent upward trajectory in revenue over the analyzed periods, demonstrating substantial growth from US$2,899,600 thousand in 2019 to US$8,027,500 thousand in 2024. This represents nearly a threefold increase over six years, indicating significant expansion in sales or service delivery.

Accounts receivable, net of allowance for credit losses, also experienced a notable increase, rising from US$582,400 thousand in 2019 to US$2,618,600 thousand in 2024. This growth in receivables parallels the revenue increase but at a proportionally higher magnitude in recent years, particularly between 2021 and 2024, where receivables more than doubled.

The receivables turnover ratio declined sharply from 4.98 in 2019 to a low of 2.57 in 2022, suggesting a slower collection process or extended credit terms during this period. However, it showed a recovery trend afterward, increasing to 3.07 by 2024. Despite this improvement, the turnover ratio in 2024 remains considerably below the 2019 level, implying that the company collects its receivables more slowly compared to earlier years.

Overall, the company is growing its revenue base significantly; however, the lengthening of the receivables collection period may impact cash flow efficiency. The rise in receivables coupled with a decreased turnover ratio highlights a potential risk in credit management or changes in customer payment behavior requiring close monitoring.

Cost of Revenue

The cost of revenue displays a consistent upward trend over the six-year period. Starting at $808.4 million in 2019, it increased steadily each year, reaching $2.059 billion by 2024. The growth rate accelerated notably from 2020 to 2022, with particularly significant increments between 2021 and 2022, indicating increased expenses related to the production or acquisition of goods and services that generate revenue.

Accounts Payable

Accounts payable shows considerable fluctuations throughout the period under review. Beginning at $73.3 million in 2019, it dipped gradually to $56.9 million in 2021, followed by a sharp increase to $128 million in 2022. Subsequent years saw a slight increase to $132.3 million in 2023 before a decline to $116.3 million in 2024. These variations suggest changes in the company's purchasing or payment practices, potentially reflecting shifts in vendor terms or payment timing.

Payables Turnover Ratio

The payables turnover ratio exhibits marked volatility. It increased notably from 11.03 times in 2019 to a peak of 22.41 times in 2021, indicating faster payments to suppliers during this period. However, the ratio decreased sharply to 13.43 times in 2022, before showing moderate increases in 2023 and 2024, reaching 17.71 times. These fluctuations point to varying efficiency or strategy in managing accounts payable, with a possible easing of payment speed after 2021.

The financial data over the given periods reveals several key trends in liquidity and operational efficiency.

Working Capital

There is a notable decline in working capital over the years, starting from a positive value of approximately 1.61 billion USD in 2019 and increasing to around 2.44 billion USD in 2020. However, from 2021 onwards, working capital turns negative and continues to deteriorate, reaching a high negative value of approximately -833 million USD by 2024. This indicates a shift from a favorable liquidity position to a constrained one, potentially suggesting increased current liabilities relative to current assets.

Revenue

Revenue demonstrates a consistent upward trajectory throughout all periods. Beginning at about 2.9 billion USD in 2019, revenue increases steadily each year, reaching roughly 8.03 billion USD by 2024. This growth trajectory reflects strong sales expansion and potentially favorable market conditions or successful business strategies.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently working capital is used to generate revenue, decreases from 1.8 in 2019 to 1.4 in 2020, followed by a lack of data for subsequent years. The initial decrease could indicate a decline in efficiency in utilizing working capital to support sales activities. The absence of later data precludes further trend analysis in this area.

In summary, despite robust revenue growth over the entire period, the company experiences diminishing liquidity as evidenced by the sharply negative working capital from 2021 forward. This divergence suggests an increasing reliance on short-term liabilities to finance operations or growth. The declining working capital turnover in the early years further supports a potential reduction in operational efficiency in terms of capital utilization, although more data would be required to confirm this trend.

Receivables Turnover

The receivables turnover ratio exhibits a clear downward trend from 4.98 in 2019 to a low of 2.57 in 2022, indicating a decline in the company's efficiency in collecting receivables during this period. Following this trough, there is a gradual recovery to 3.07 by 2024, suggesting an improvement in the management of receivables in the more recent years.

Average Receivable Collection Period

The average collection period aligns inversely with the trend observed in the receivables turnover ratio. It increased significantly from 73 days in 2019 to a peak of 142 days in 2022, reflecting slower collection processes and potentially increasing credit risk or relaxed credit terms. However, from 2022 onwards, the collection period shortens to 119 days by 2024, indicating some regained efficiency in collecting outstanding receivables.

Summary of Receivables Management Trends

Overall, the data demonstrates a period of deteriorating receivables management performance between 2019 and 2022, marked by reduced turnover and prolonged collection periods. The subsequent partial reversal after 2022 suggests that initiatives may have been implemented to improve credit control and collections, though efficiency has not fully returned to earlier levels. Close monitoring of receivable turnover and collection periods is advisable to ensure continued improvement and to mitigate potential liquidity risks.

Payables Turnover

The payables turnover ratio demonstrates a notable fluctuation over the observed periods. Initially, the ratio increased significantly from 11.03 in 2019 to a peak of 22.41 in 2021, indicating a faster rate of paying off suppliers during this timeframe. However, this trend reversed in 2022, with the ratio declining to 13.43, suggesting a slower payments process, before rising again in subsequent years to reach 17.71 by 2024. This rebound signifies improved efficiency in managing payables compared to 2022, but not to the highs experienced in 2021.

Average Payables Payment Period

The average payables payment period moves inversely to the payables turnover ratio, as expected. From 33 days in 2019, it declined steadily to a low of 16 days in 2021, reflecting accelerated payment to suppliers. Following this period, the payment period extended to 27 days in 2022, indicating more extended payment terms or slower payments. In the last two years, the period has shortened again to 21 days by 2024, suggesting an improvement in payment speed, although it remains longer than the shortest duration recorded in 2021.

Overall Trends and Insights

The data illustrates a dynamic payment behavior over the six-year span. The peak efficiency in supplier payments in 2021 is a standout, with the highest payables turnover and lowest payment period. The subsequent year shows a clear reversal, possibly reflecting changes in company policy or external factors affecting liquidity management. The partial recovery in 2023 and 2024 suggests adjustments have been made to improve the payment process. Nonetheless, the payment speed has not completely returned to its peak efficiency. This pattern indicates ongoing refinement in managing payables, balancing supplier relationships and internal cash flow considerations.