Shockwave Medical Inc. (NASDAQ:SWAV)

The analysis of the financial turnover and cycle metrics reveals several notable trends over the five-year period examined.

Inventory Turnover

The inventory turnover ratio decreased sharply from 1.42 in 2019 to 0.7 in 2020, indicating slower inventory movement. Although there was some recovery in subsequent years, reaching 0.96 in 2021 and slightly declining again to around 0.89 by 2023, the turnover remained below the 2019 level. This suggests challenges in managing inventory efficiently over the period.

Receivables Turnover

The receivables turnover ratio remained relatively stable, with a slight increase from 5.82 in 2019 to a peak of 6.86 in 2022, signaling improved efficiency in collecting receivables. However, it decreased moderately to 6.37 in 2023, though still above the initial 2019 value. This pattern denotes generally consistent credit management with minor fluctuations.

Payables Turnover

Payables turnover exhibited significant volatility. Starting at 6.15 in 2019, it surged dramatically to 14.32 in 2020, then declined gradually to 10.76 in 2023. The sharp increase suggests faster payment to suppliers in 2020, followed by a gradual lengthening of payment terms or slower payment pace in subsequent years, albeit remaining faster than the 2019 baseline.

Working Capital Turnover

Working capital turnover improved considerably, rising from a low 0.22 in 2019 to a peak of 1.24 in 2022, before decreasing to 0.65 in 2023. This indicates that the company became more effective in using its working capital to generate sales during this period, though the decline in the last year may reflect reduced operational efficiency or changes in working capital structure.

Average Inventory Processing Period

The average number of days to process inventory increased significantly from 257 days in 2019 to a high of 519 days in 2020, before gradually decreasing to 412 days by 2023. Despite improvement from the peak, the processing period remains substantially longer than in 2019, signaling potential difficulties in inventory turnover and stock management.

Average Receivable Collection Period

There was a decrease in the average receivable collection period from 63 days in 2019 to 53 days in 2022, indicating faster collection of receivables, which is a positive sign of cash flow management. However, it slightly increased to 57 days in 2023, suggesting a modest easing in collection speed but still overall improved compared to the start of the period.

Operating Cycle

The operating cycle lengthened sharply from 320 days in 2019 to 582 days in 2020, then shortened steadily to 469 days by 2023. The initial spike reflects increased inventory holding and slower processing or extended receivables collection in 2020, with gradual operational improvements afterward, though the cycle remained longer than in 2019.

Average Payables Payment Period

The average payables payment period dropped substantially from 59 days in 2019 to 25 days in 2020, then gradually increased again to 34 days by 2023. This pattern indicates a quicker payment to suppliers in 2020, shifting towards a more balanced payment schedule in later years, albeit still shorter than in 2019.

Cash Conversion Cycle

The cash conversion cycle followed a pattern similar to the operating cycle, rising drastically from 261 days in 2019 to 557 days in 2020, then declining to 435 days by 2023. Despite improvement after the peak, the overall cash conversion process remained extended compared to the beginning of the period, highlighting ongoing challenges in optimizing working capital timings.

The financial data reveals significant developments in the cost of revenue and inventory levels over the five-year period. There is a pronounced upward trend in both cost of revenue and inventory, indicating expanding production or sales activities.

Cost of Revenue

The cost of revenue increased consistently each year. Starting from approximately 17.2 million US dollars in 2019, it rose to nearly 21.0 million in 2020, then nearly doubled to 41.4 million in 2021. This upward trajectory continued with the cost reaching 65.0 million in 2022 and further escalating to 95.4 million in 2023. The progressive rise suggests growth in operational scale or higher production expenses over time.

Inventory

Inventory levels also experienced marked growth across the reported years. From 12.1 million US dollars in 2019, inventory more than doubled to 29.9 million in 2020 and continued increasing to 43.0 million in 2021. This growth accelerated as inventory rose to 75.1 million in 2022 and reached 107.6 million by 2023. Such an increase could indicate stockpiling in anticipation of higher sales, delays in inventory turnover, or expansion of the product range.

Inventory Turnover

Inventory turnover ratio exhibited volatility with an overall declining trend. Beginning at 1.42 in 2019, the ratio nearly halved to 0.7 in 2020, indicating slower inventory movement relative to cost of goods sold. Although there was a recovery to 0.96 in 2021, turnover decreased again to 0.87 in 2022 and slightly rose to 0.89 in 2023. The persistently low turnover ratio suggests increasing inventory holding periods and potential inefficiencies in stock management or demand forecast.

In summary, the data signals robust operational growth but also highlights concerns regarding inventory management. The substantial increases in cost of revenue and inventory imply scaling business activities, while the declining inventory turnover ratio points to potential challenges in converting inventory into sales efficiently. Monitoring these trends will be essential for optimizing working capital and ensuring sustainable growth.

Revenue

Revenue exhibited a strong upward trajectory over the five-year period, increasing from $42.9 million at the end of 2019 to $730.2 million by the end of 2023. This represents a compound growth, with particularly notable acceleration between 2020 and 2021, where revenue more than tripled, followed by continued robust increases in subsequent years.

Accounts Receivable, Net

Net accounts receivable also increased substantially, growing from approximately $7.4 million in 2019 to $114.6 million in 2023. This increase correlates with the higher sales volumes reflected in revenue growth. The rise in accounts receivable indicates more outstanding customer payments, which is consistent with the expansion of business operations.

Receivables Turnover Ratio

The receivables turnover ratio improved marginally from 5.82 in 2019 to a peak of 6.86 in 2022, suggesting a trend toward more efficient collection of receivables during that period. However, there was a slight decline to 6.37 in 2023, which may indicate a mild relaxation in collection efficiency or extended payment terms to customers amidst growing sales.

Summary of Trends

The financial data reveals a period of rapid revenue growth supported by an increasing accounts receivable balance, reflecting expanded sales and possible adjustments in credit policy or payment terms. Despite the growth in receivables, the company managed to maintain or improve its receivables turnover ratio for most of the period, indicating effective credit and collection management. The slight dip in turnover at the end of the period warrants monitoring to ensure working capital efficiency is maintained.

The annual financial data reveals significant trends in the cost structure and payment cycles over the five-year period.

Cost of Revenue

The cost of revenue exhibited a consistent and pronounced increase each year. Starting at $17,159 thousand in 2019, it rose to $20,991 thousand in 2020, nearly doubling to $41,438 thousand in 2021. This upward trajectory continued more steeply, reaching $64,996 thousand in 2022 and culminating at $95,388 thousand in 2023. This pattern indicates substantial growth in production or service delivery expenses, suggesting possible expansion or increased scale of operations.

Accounts Payable

Accounts payable showed a more variable pattern over the analyzed period. It decreased notably from $2,790 thousand in 2019 to $1,466 thousand in 2020, then surged to $3,520 thousand in 2021. The upward trend persisted with $6,721 thousand in 2022 and $8,868 thousand in 2023. The initial drop followed by a strong increase may reflect changes in supplier terms, payment policies, or purchasing activities aligned with the cost escalation.

Payables Turnover Ratio

The payables turnover ratio, reflecting the efficiency with which the company pays its suppliers, showed a fluctuating but overall downward trend from 2019 through 2022. It peaked at 14.32 in 2020 from 6.15 in 2019, then declined to 11.77 in 2021 and further to 9.67 in 2022, before slightly improving to 10.76 in 2023. The decrease after 2020 suggests a lengthening of payment cycles or slower utilization of accounts payable, which could be interpreted as relaxed payment terms or cash management strategies during a period of rapid cost increases.

Working Capital

Working capital increased steadily from 2019 through 2022, rising from approximately 193 million US dollars in 2019 to nearly 396 million US dollars in 2022. A significant acceleration occurred in 2023, with working capital surging to over 1.12 billion US dollars, indicating enhanced liquidity and potentially greater operational capacity or accumulated resources.

Revenue

Revenue exhibited substantial growth over the five-year period. Starting at roughly 43 million US dollars in 2019, revenue rose to about 68 million in 2020 before experiencing a sharp increase to approximately 237 million in 2021. This upward trajectory continued, with revenue reaching nearly 490 million in 2022 and exceeding 730 million in 2023. The nearly 17-fold increase in revenue from 2019 to 2023 reflects strong top-line expansion and suggests successful market penetration or increased sales volume.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently working capital is used to generate revenue, improved steadily from 0.22 in 2019 to 1.24 in 2022, indicating an increasing efficiency in utilizing working capital to drive revenue growth during this period. However, in 2023, this ratio declined to 0.65, suggesting that despite the larger working capital base, revenue growth did not keep pace proportionally, possibly due to a substantial build-up of current assets or a strategic shift in working capital management.

The financial data reveals trends in inventory management efficiency over a five-year period ending in 2023. Analysis of the inventory turnover ratio and the average inventory processing period provides insights into the company's operational effectiveness in managing stock.

Inventory Turnover Ratio

The inventory turnover ratio declined significantly in 2020 to 0.7 from 1.42 in 2019, indicating reduced frequency of inventory replacement during that year. A partial recovery occurred in 2021 with a ratio of 0.96, followed by a slight decrease to 0.87 in 2022. In 2023, the ratio marginally improved to 0.89. Overall, the ratio remained below the 2019 level throughout the observed period, suggesting a general trend toward slower inventory movement.

Average Inventory Processing Period

Complementing the turnover data, the average inventory processing period increased sharply in 2020 to 519 days, doubling the 2019 figure of 257 days. Although there was a notable reduction to 379 days in 2021, the processing period lengthened again to 422 days in 2022 and slightly decreased to 412 days in 2023. Despite fluctuations, the processing period throughout the last four years consistently exceeded the 2019 benchmark, indicating extended durations for inventory to be sold or used.

In summary, the data reflects a period of decreased inventory turnover and prolonged inventory holding times beginning in 2020, with some signs of recovery in 2021 but persistent challenges through 2023. These trends could imply difficulties in inventory management or changes in sales dynamics, potentially impacting working capital efficiency.

Receivables Turnover Ratio

The receivables turnover ratio exhibits an overall upward trend from 2019 to 2022, increasing from 5.82 to a peak of 6.86. This trend suggests an improvement in the efficiency of collecting receivables during this period. However, in 2023, the ratio declined to 6.37, indicating a slight reduction in collection efficiency compared to the prior year, though still higher than the values reported in 2019 and 2020.

Average Receivable Collection Period

The average collection period decreased consistently from 63 days in 2019 and 2020 to 53 days in 2022, which reflects a faster conversion of receivables into cash. This trend aligns with the increase observed in the receivables turnover ratio over the same period. In 2023, the collection period slightly increased to 57 days, indicating a modest slowdown in the collection process compared to 2022, yet it remains shorter than the initial value recorded in 2019.

Summary of Receivables Management

Overall, the data points to an improvement in receivables management and collection efficiency from 2019 through 2022, with increased turnover and reduced collection days. The moderate reversal in these metrics in 2023 suggests some easing in performance, though the receivables management remains better than the earliest period observed. This pattern could warrant monitoring to determine whether the 2023 shift is a temporary fluctuation or the beginning of a new trend.

The analysis of the annual financial indicators reveals significant fluctuations and trends in the operational efficiency measures over the period evaluated.

Average Inventory Processing Period

The average inventory processing period experienced a notable increase from 257 days in 2019 to a peak of 519 days in 2020, indicating a slowdown in inventory turnover. Subsequently, this period decreased to 379 days in 2021 but then rose again to 422 days in 2022, followed by a slight decline to 412 days in 2023. This pattern suggests variability in inventory management efficiency, with overall higher inventory holding durations compared to the initial year.

Average Receivable Collection Period

The receivable collection period remained relatively stable, starting at 63 days in 2019 and maintaining the same duration in 2020. It then improved modestly to 58 days in 2021 and further shortened to 53 days in 2022, indicating enhanced efficiency in receivables collection. A minor increase to 57 days was observed in 2023, though the period still reflects better performance compared to the earlier years.

Operating Cycle

The operating cycle exhibited a pattern corresponding to the fluctuations in inventory processing and receivables collection periods. It surged from 320 days in 2019 to 582 days in 2020, reflecting increased total time to convert resources into cash. Afterwards, the cycle shortened to 437 days in 2021, then extended again to 475 days in 2022, and slightly decreased to 469 days in 2023. Despite some improvements post-2020, the operating cycle remains significantly longer than the baseline year, indicating ongoing challenges in overall operational efficiency.

Payables Turnover Ratio

The payables turnover ratio exhibited significant fluctuations over the five-year period. Starting at 6.15 in 2019, there was a marked increase to 14.32 in 2020, indicating a more rapid payment of payables or possibly improved management of short-term liabilities. Subsequently, this ratio decreased to 11.77 in 2021, followed by a further decline to 9.67 in 2022. In 2023, there was a slight rebound to 10.76. Overall, the trend suggests that the company accelerated payments sharply in 2020 but gradually moderated the pace in the following years.

Average Payables Payment Period

The average payables payment period, measured in days, moved inversely relative to the payables turnover ratio, as expected. It fell dramatically from 59 days in 2019 to 25 days in 2020, reflecting the faster payment cycle noted above. From 2020 onward, this metric increased steadily to 31 days in 2021 and 38 days in 2022, suggesting a loosening of payment speed or extended payment terms. In 2023, the period shortened slightly to 34 days but remained well below the 2019 level. This pattern indicates an initial tightening in payment timing followed by a moderate elongation in subsequent years.

Insight Summary

The data reveals a strategic shift around 2020 towards quicker settlement of payables, which could reflect either negotiation of better terms with suppliers, improved cash management, or a response to external business conditions. In the period after 2020, there appears to be a recalibration towards a more balanced approach to the payment cycle, possibly optimizing working capital or supplier relationships. The company maintains a shorter payment period in 2023 compared to 2019, indicating an overall trend toward more efficient accounts payable management.

Average Inventory Processing Period

The average inventory processing period exhibited significant fluctuation over the five-year span. Starting at 257 days in 2019, it more than doubled to 519 days in 2020, indicating a substantial slowdown in inventory turnover. Subsequently, the period decreased to 379 days in 2021, but then modestly increased again to 422 days in 2022 and slightly declined to 412 days in 2023. This pattern suggests challenges in inventory management or sales demand variability during this timeframe.

Average Receivable Collection Period

The average receivable collection period demonstrated a generally improving trend until 2022, followed by a minor regression in 2023. The period remained steady at 63 days in 2019 and 2020, then improved to 58 days in 2021 and further to 53 days in 2022, reflecting enhanced efficiency in collecting receivables. However, in 2023, it increased slightly to 57 days, indicating a slight loosening in credit collection practices or customer payment timing.

Average Payables Payment Period

The average payables payment period experienced a pronounced reduction from 2019 to 2020, decreasing from 59 days to 25 days. This sharp decline implies quicker payment to suppliers during this period. Thereafter, the payment period increased to 31 days in 2021, continued to 38 days in 2022, and slightly decreased to 34 days in 2023. Despite some recovery, the payment period remained below the 2019 level, signaling a tendency toward faster supplier payments compared to the earlier years.

Cash Conversion Cycle

The cash conversion cycle mirrors the combined trends of the preceding metrics and shows considerable variation. It started at 261 days in 2019, surged significantly to 557 days in 2020, then decreased to 406 days in 2021. The cycle increased again to 437 days in 2022 and remained relatively stable at 435 days in 2023. The elevated values, particularly in 2020 and subsequent years, suggest prolonged cash tied up in the operating cycle, potentially impacting liquidity.