Shockwave Medical Inc. (NASDAQ:SWAV)

Inventory Turnover

The inventory turnover ratio exhibits a generally stable but low trend, fluctuating mostly between 0.69 and 0.92 over the observed periods. There is a slight improvement from a low of 0.7 in late 2020 to around 0.9 in early 2024, indicating modest gains in inventory management efficiency.

Receivables Turnover

Receivables turnover demonstrates moderate variation, with values ranging from approximately 4.31 to 8.03. After a low point in early 2021, the ratio improved and stabilized around 6.3 to 6.8 in recent periods, suggesting a relatively consistent approach to accounts receivable collection.

Payables Turnover

Payables turnover shows substantial volatility, fluctuating between approximately 5.48 and 17.34. Peaks and troughs occur frequently, reflecting variability in the rate at which payables are settled. This inconsistency may indicate fluctuating payment policies or supplier terms over quarters.

Working Capital Turnover

Working capital turnover exhibits a marked improvement from 0.28 in early 2020 to a peak of 1.64 mid-2023, followed by a decline to around 0.65 by early 2024. The initial upward trend suggests increasing efficiency in utilizing working capital, whereas the recent decrease could signal operational challenges or changes in asset and liability management.

Average Inventory Processing Period

The average inventory processing period is high, reflecting slow movement of inventory, beginning at 294 days and rising sharply to above 500 days in 2020. A gradual decrease follows, stabilizing between 400 and 420 days in recent periods. Despite some improvement, the inventory turnover process remains extended.

Average Receivable Collection Period

Average receivable collection days present a wide range from 45 days to 85 days, peaking in early 2021. Post-peak, there is a trend toward reduction and stabilization in the mid-50s days, indicating improved but moderately paced collection efforts.

Operating Cycle

The operating cycle is relatively long, ranging from 350 up to over 610 days early in the analysis. It follows a downward trend after mid-2021, settling around 454 days by early 2024. This reflects combined improvements in both inventory processing and receivables collection periods.

Average Payables Payment Period

The average payables payment period fluctuates significantly between 21 and 67 days, with no clear trend. Peaks align with some decreases in payables turnover, indicating periods of slower payments to suppliers, which may be an effort to optimize cash flow.

Cash Conversion Cycle

The cash conversion cycle remains prolonged, fluctuating between 310 and 557 days. While there was a notable peak in 2020, the cycle shows a decreasing tendency thereafter, arriving near 419 days in early 2024. This trend suggests gradual improvements in overall cash flow management, though the cycle remains lengthy.

Cost of Revenue

The cost of revenue demonstrates a steadily increasing trend across the observed quarters. Beginning at a value of approximately $5.65 million in the first quarter of 2020, it rises with notable acceleration from mid-2021 onward, reaching a peak of about $28.21 million in the first quarter of 2024. This consistent growth suggests increasing production or service delivery costs, possibly due to higher sales volumes, inflationary pressures, or increased input prices.

Inventory

The inventory levels exhibit a persistent upward trajectory throughout the periods analyzed. Starting at roughly $15.9 million in early 2020, inventory accumulates significantly over time, crossing $111 million by the first quarter of 2024. This increase indicates either stockpiling in anticipation of sales growth or challenges in inventory management such as slower turnover or supply chain delays.

Inventory Turnover Ratio

The inventory turnover ratio fluctuates within a relatively narrow range, declining initially from 1.24 to around 0.7 in late 2020, indicating slower inventory movement. After bottoming out, the ratio recovers gradually, stabilizing between 0.87 and 0.92 from 2022 onwards. While this recovery shows improvement in inventory efficiency, the ratio remains below the early 2020 levels, implying that inventory moves at a slower pace compared to the start of the period assessed.

Overall Insights

The combination of rising cost of revenue and increasing inventory levels, alongside a relatively stable but subdued inventory turnover ratio, suggests that the company is experiencing growth that places demands on its supply and inventory management systems. Although inventory is growing, turnover improvements indicate some strides in operational efficiency but not enough to offset the growth in inventory volume. This scenario may warrant close attention to working capital management and strategies to optimize inventory levels relative to sales.

The financial data reveals substantial growth in revenue over the observed periods, with a notable upward trend from March 31, 2020, through March 31, 2024. The revenue started at approximately $15.2 million and consistently increased, reaching over $218.8 million by the end of the latest quarter. This steady rise indicates strong top-line expansion and increasing market demand or sales volume.

Accounts receivable, net, also exhibited a marked increase, growing from about $7.8 million at the beginning of the period to roughly $124.4 million by the latest quarter. This growth mirrors the revenue trend and suggests that the company is extending more credit or experiencing longer collections periods, which warrants close monitoring to ensure cash flow stability.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates variability over the periods but generally remains within a moderate range. It started at 6.51 in March 2020, experienced a dip to a low of 4.31 by March 2021, and then recovered to fluctuate mostly between 6.0 and 6.8 in subsequent quarters, finishing at 6.33.

This pattern suggests some initial challenges in collections efficiency coinciding with rapid revenue growth but shows improvement and relative stabilization in managing accounts receivable in the following quarters. Despite increased receivables, the company has managed to maintain a reasonable turnover rate, implying effective credit and collection policies.

Overall, the analysis points to strong business growth supported by expanding sales and corresponding increases in accounts receivable. The receivables turnover ratio indicates that, while the company faced some collection challenges during early rapid growth phases, it has since achieved consistency in converting receivables to cash. Continuous attention to receivables management will be important to sustain liquidity alongside ongoing expansion.

The cost of revenue demonstrates a general upward trajectory over the analyzed time frame, reflecting increasing expenses tied to production or service delivery. Starting from approximately 5.65 million US dollars at the end of Q1 2020, the cost rose with some fluctuations, reaching a level of about 28.2 million US dollars by Q1 2024. Notable increments occur particularly after mid-2021, indicating either growth in business scale or inflationary cost pressures.

Accounts payable exhibit considerable volatility throughout the periods. Initially, accounts payable balance was around 2.15 million US dollars in Q1 2020, then showed oscillations with a marked spike near Q1 2022, peaking beyond 11 million US dollars in early 2023. Subsequently, the balances fluctuate, stabilizing between 6.8 and 9.8 million US dollars in 2023 and early 2024. The peaks may suggest extended credit terms or accumulation of payables associated with higher operational volume.

The payables turnover ratio fluctuates significantly quarter-to-quarter, indicating variability in how rapidly the company settles its obligations to suppliers. High turnover values, such as 17.34 in Q3 2022, imply quicker payments, while lower values, such as 5.48 in Q1 2022 and around 6.3 in mid-2023, indicate slower payment cycles. This inconsistent pattern could reflect changing payment policies, seasonal working capital needs, or supplier negotiation dynamics. The ratio does not show a clear trend of improvement or deterioration over the entire period but suggests reactive adjustments in payment behavior in response to operational or market conditions.

Cost of Revenue

Shows an increasing pattern with occasional variability, reflecting growth in operational costs, rising from about 5.65 million to over 28 million US dollars.

Accounts Payable

Displays volatility with notable peaks around early 2022 and 2023, suggesting fluctuating credit terms or changes in purchasing activity.

Payables Turnover Ratio

Highly variable across quarters without a clear directional trend, indicating changing payment speeds to creditors which may correspond with operational adjustments.

The analysis reveals several key trends in the financial performance and position over the observed periods.

Working Capital

The working capital shows a general upward trend over the entire period. Beginning at approximately $179 million in early 2020, it fluctuated modestly in the first years but started increasing more significantly from 2022 onwards. The most notable increases occurred in the latter quarters of 2023 and into early 2024, with working capital surpassing $1 billion, indicating a substantial growth in current assets relative to current liabilities.

Revenue

Revenue exhibits consistent growth across the periods. From a base of around $15 million in early 2020, it nearly doubled by the end of 2021, moving from $15 million to over $84 million. This growth accelerated further, as revenue reached approximately $219 million by the first quarter of 2024. The upward trajectory is steady, with no distinct interruptions or decline, demonstrating expanding sales and potential market penetration.

Working Capital Turnover

The working capital turnover ratio, which measures how efficiently the company generates revenue from its working capital, initially increased from 0.28 to just over 1.0 by the end of 2021, indicating improved efficiency. In 2022, the ratio remained relatively stable slightly above 1.2, but a notable spike to 1.64 occurred in mid-2023. However, this spike was followed by a sharp decline to about 0.64 in early 2024, correlating with the large increases in working capital during the same period. This inverse movement suggests that while working capital increased significantly, revenue did not grow proportionally, leading to reduced turnover efficiency.

Overall, the company demonstrates robust revenue growth accompanied by a significant increase in working capital, particularly in recent periods. The efficiency in using working capital to generate revenue improved steadily until mid-2023, after which it declined due to disproportionate growth in working capital relative to revenue. This dynamic may warrant further investigation into the components driving the increase in working capital and their implications for operational efficiency and liquidity management.

Inventory Turnover Ratio Trends

The inventory turnover ratio exhibited an initial decline from 1.24 in the first quarter of 2020 to a low of 0.69 by the first quarter of 2021. Subsequently, a gradual improvement was observed through 2021 and into 2022, with the ratio increasing to approximately 0.96 by the end of 2021. However, throughout 2022 and into 2024, the turnover ratio stabilized, fluctuating narrowly around 0.87 to 0.92, indicating a modest but consistent inventory turnover rate in recent periods.

Average Inventory Processing Period Trends

The average inventory processing period increased significantly from 294 days at the end of the first quarter 2020 to a peak of 527 days by the first quarter of 2021, reflecting slower inventory movement and longer holding periods. Following this peak, a steady decline was noted through the remainder of 2021, dropping to 379 days by year-end. Throughout 2022 and into early 2024, this metric remained relatively stable, hovering around 400 to 420 days, with a slight improving trend towards 396 days reported in the first quarter of 2024.

Interpretation and Insights

The initially decreasing inventory turnover ratio alongside the increasing average inventory processing period suggest that inventory was moving more slowly during 2020 and early 2021. The subsequent gradual improvements in turnover and reductions in processing time suggest enhanced inventory management practices or changes in demand patterns leading to more efficient inventory utilization. The stabilization of these metrics in recent quarters indicates the company may have reached a more consistent equilibrium in its inventory cycle, though the processing period remains high, reflecting relatively long inventory holding durations compared to typical industrial benchmarks.

The receivables turnover ratio exhibits some variability over the observed periods, starting at 6.51 in the first quarter of 2020, climbing to a peak of 8.03 in the second quarter of 2020, and subsequently declining to a low of 4.31 in the first quarter of 2021. Following this, the ratio demonstrates a generally upward trend, stabilizing around the mid to high 6s in the most recent quarters, with a slight dip to 6.33 by the first quarter of 2024.

Correspondingly, the average receivable collection period, which is the inverse metric expressed in days, shows an opposite movement to the turnover ratio. It begins at 56 days in the first quarter of 2020, reduces to a minimum of 45 days in the second quarter of 2020, and then increases significantly to 85 days by the first quarter of 2021. Thereafter, it gradually declines and stabilizes, fluctuating between the low 50s and close to 60 days towards the latest periods.

Receivables Turnover Ratio

Initially high volatility is observed, with a sharp increase followed by a notable decrease in early 2021.

Post-first quarter 2021, the ratio demonstrates relative stabilization within the 6 to 7 range, indicating steadier collection efficiency.

The general trend suggests improvements in receivables management after early 2021.

Average Receivable Collection Period

Fluctuations correspond inversely to the turnover ratio, peaking at 85 days in early 2021, indicating slower collections during that time.

Improvement is seen after this peak, with collection periods shortening and becoming more consistent, primarily ranging from about 53 to 58 days recently.

The stabilization of collection days aligns with a more controlled receivables process, enhancing cash flow predictability.

In summary, the data indicates that the company experienced a phase of reduced receivables efficiency approximately around the first quarter of 2021, as reflected by a low turnover ratio and prolonged collection days. Since then, both key metrics have improved and stabilized, suggesting better credit management and more effective collection practices over time. The consistency in the latest periods points to an established balance in managing receivables turnover and collection periods.

The financial data reveals notable fluctuations and evolving trends in the company's operating efficiency metrics over the observed quarterly periods.

Average Inventory Processing Period

The average inventory processing period demonstrates an overall decreasing trend after peaking in the earlier quarters. It initially surged from 294 days to a high of 527 days by March 31, 2021, indicating a significant increase in the time inventory remained in stock. Following this peak, a consistent reduction is observed, with values declining to 379 days by December 31, 2021. In the subsequent years, the period stabilizes within the 400-420 day range, showing slight fluctuations but a generally improved inventory turnover compared to the earlier peak.

Average Receivable Collection Period

The average receivable collection period exhibits moderate volatility without a clear trending direction over the reported periods. It rose from 56 days at the beginning to a peak of 85 days by March 31, 2021, revealing an elongation in the time taken to collect receivables. Subsequently, the period shortens gradually to a range between 53 and 58 days, indicating an improvement in receivables management and collection efficiency in the later quarters.

Operating Cycle

The operating cycle closely mirrors the movement seen in the inventory processing period and receivable collection period, given that it represents the sum of both. It escalated markedly from 350 days to a peak of 612 days as of March 31, 2021, reflecting an extended cash conversion cycle driven primarily by longer inventory holding and receivable collection durations. After this apex, the cycle declines steadily to approximately 437 days by the end of 2021 and then stabilizes in the range of 454 to 475 days in subsequent periods, suggesting enhanced operational efficiency and cash flow management.

Overall, the data indicate that the company faced challenges in inventory management and receivables collection in the early periods, resulting in prolonged operating cycles. However, improvements became apparent post-March 2021, with both inventory processing and receivables collection periods reducing and the operating cycle shortening and stabilizing, signaling a more efficient utilization of working capital and better liquidity management in recent quarters.

The analysis of the payables turnover ratio and the average payables payment period over the examined quarters reveals notable fluctuations and cyclical patterns in the company's payment behavior and supplier management efficiency.

Payables Turnover Ratio

This ratio demonstrates considerable variability, oscillating between lower and higher values without a consistent linear trend. Initial quarters show moderate turnover, with values such as 9.18 in early 2020 declining to 7.49 and then rising to 14.32 by the end of 2020. The subsequent years show alternating peaks and troughs; for example, mid-2021 exhibits a high of 11.23 after dipping to 6.23 earlier that year, while late 2022 reaches an elevated level of 17.34 before dropping again in 2023.

The alternating pattern suggests intermittent changes in the company's payment speed to suppliers, possibly influenced by operational cycles, cash flow management strategies, or supply chain conditions. High turnover ratios imply quicker payments and efficient working capital use, whereas lower ratios indicate extended credit terms or delayed payments.

Average Payables Payment Period

The payment period in days exhibits an inverse behavior relative to the payables turnover ratio, as expected. Periods characterized by high turnover ratios correspond to shorter average payment durations, and vice versa.

For instance, the payment period increased from 40 days in early 2020 to 59 days by the first quarter of 2021, aligning with a low turnover ratio of 6.23 during that time. Conversely, shorter payment periods of approximately 21 to 29 days occur in quarters where turnover ratios peaked, such as late 2022 and late 2023.

This fluctuation indicates a variable approach to settling accounts payable, alternating between utilizing longer supplier credit terms and accelerating payments. Such changing dynamics could reflect adaptations to liquidity status, negotiation of terms with suppliers, or shifting operational demands.

Overall, the data portray a non-linear and cyclical management of payables, with alternating periods of fast and slow payments. The company’s payables turnover and payment period are inversely related throughout the analyzed timeframe, highlighting changes in payment policies or working capital management rather than stable or steadily improving trends.

The analysis of the key operational efficiency metrics over the observed periods reveals several notable trends and shifts. The focus is on the average inventory processing period, average receivable collection period, average payables payment period, and the resulting cash conversion cycle, all measured in days.

Average Inventory Processing Period

This metric exhibits a generally high level with significant fluctuations. Initially, there is a steep increase from 294 days to a peak of 527 days within one year, indicating a considerable slow-down in inventory turnover. Subsequently, a gradual improvement occurs, with the inventory period declining to the 379-446 day range late in 2021. In the more recent periods through early 2024, the average processing period stabilizes around approximately 400 to 415 days, suggesting some operational adjustments might have been implemented to enhance inventory management, yet inventory still remains held for an extended duration.

Average Receivable Collection Period

The receivable collection period shows moderate variability but remains within a narrower band relative to inventory processing. It starts around 56 days, dips to a low of 45 days, then increases to a high of 85 days in early 2021. Following this peak, it consistently decreases and stabilizes around the mid-50s. This pattern indicates that after a temporary elongation in collection times, efforts to improve receivables turnover were successful, enhancing cash inflows from customers over the last several quarters.

Average Payables Payment Period

The payables payment period experiences more pronounced swings compared to receivables. The timeline shows initial fluctuations between 25 and 59 days, with a significant peak of 67 days around early 2022. This peak marks an important extension of the payment cycle, potentially indicating a strategic deferral of cash outflows. However, subsequent quarters witness a contraction, with values settling mostly between 29 to 58 days. The variability may reflect shifts in supplier negotiation strategies or cash management policies.

Cash Conversion Cycle (CCC)

The cash conversion cycle follows a pattern largely driven by changes in inventory and receivables periods. Starting from 310 days, the CCC rises sharply to over 550 days by late 2020, pointing to an increased time lag between cash outflows and inflows, which can pressure liquidity. Later, there is a downward adjustment to near 400 days, revealing efforts to optimize working capital. Despite minor fluctuations, the cycle remains elevated around 415 to 435 days through recent periods, suggesting persistent challenges in reducing the operating cash cycle length.

In summary, the data reflects an operational environment characterized by initially prolonged inventory holdings and increased receivable collection periods that together contributed to an extended cash conversion cycle. Improvements in receivables and incremental reductions in inventory processing and payables periods have somewhat mitigated these conditions. Nonetheless, the overall cash conversion cycle remains at a relatively high level, indicating potential areas for ongoing working capital management enhancements to better optimize liquidity and operational efficiency.