Vertex Pharmaceuticals Inc. (NASDAQ:VRTX)

Inventory turnover

The inventory turnover ratio shows a declining trend starting from 2.62 in March 2021 to 1.14 by March 2025. This decline indicates a slowing pace at which inventory is being sold and replaced, possibly reflecting increased inventory levels or reduced sales efficiency over the period.

Receivables turnover

Receivables turnover fluctuates slightly but mostly remains in a range between approximately 5.95 and 7.19. There is no strong consistent upward or downward trend, suggesting that the company's effectiveness in collecting receivables remains relatively stable with moderate variability.

Payables turnover

Payables turnover exhibits significant fluctuation. It peaks notably at 8.23 in December 2021 but falls to values around 3.13–4.27 in subsequent periods. The variability suggests inconsistency in payment patterns to suppliers, with periods of both faster and slower payment cycles.

Working capital turnover

Working capital turnover oscillates with minor decreases and increases before rising sharply from 0.93 in December 2023 to around 1.83 by December 2024, and stabilizing slightly thereafter. This increase may represent enhanced generation of sales relative to working capital employed, indicating improved operational efficiency in the latter periods.

Average inventory processing period

The average inventory processing period increases steadily over time, from approximately 139 days in early 2021 to 320 days by March 2025. This lengthening period confirms the declining inventory turnover and indicates that inventory remains held for increasingly longer durations before sale.

Average receivable collection period

The average collection period for receivables remains relatively stable, fluctuating between 51 and 64 days across the timeline. This stability suggests consistent credit and collection policies, with slight increases occurring intermittently but no persistent trend.

Operating cycle

The operating cycle lengthens progressively from approximately 191 days in early 2021 to 379 days by March 2025. The extension of the operating cycle reflects the combination of longer inventory processing and receivables collection periods, implying a slower overall flow of cash through operational activities.

Average payables payment period

The average payables payment period varies markedly, initially decreasing from around 77 days to as low as 44 days by late 2021, before increasing again to exceed 100 days by early 2023 and fluctuating thereafter. This indicates shifts in the company’s payment strategies, moving between quicker and more extended payment durations to suppliers.

Cash conversion cycle

The cash conversion cycle displays an increasing trend from 114 days in early 2021 to 274 days by March 2025. This rise corresponds with the lengthening inventory and operating cycles and indicates a gradual slowdown in the time taken to convert investments in inventory and receivables back into cash, potentially impacting liquidity.

The financial data reveals several noteworthy trends over the examined periods. Cost of sales shows an overall increasing pattern with some fluctuations. From March 2020 to December 2021, the cost of sales rose consistently, moving from approximately $162.5 million to around $247.4 million. This upward trajectory continued, reaching a peak near $423.4 million in December 2024, before slightly declining to $363.0 million in March 2025. The incremental increases suggest growing operational activity or rising production expenses over time, although the decline in the final recorded quarter may indicate changes in demand, pricing, or cost management.

Inventories exhibit a sustained and marked increase throughout the entire period. Starting at roughly $187.1 million in March 2020, inventory levels nearly doubled by the end of 2021 and continued to grow substantially thereafter. By March 2025, inventories reached approximately $1.36 billion, indicating significant accumulation of stock. This consistent buildup may reflect strategic stockpiling, anticipated demand growth, or potential challenges in inventory turnover efficiency.

The inventory turnover ratio, calculated for most recent periods starting in the latter part of 2020, displays a declining trend. Initially, the ratio hovered around 2.6 to 2.8, indicating that the company turned over its inventory about 2.6 to 2.8 times per year during that time frame. However, over subsequent quarters, the ratio steadily decreased to approximately 1.14 by March 2025. This decline signifies a slowing in the frequency with which inventory is sold and replaced, suggesting either lengthening holding periods or difficulties in moving stock. The drop in turnover ratio alongside rising inventory levels may warrant a careful review of inventory management practices or demand forecasting.

Cost of Sales

Generally increasing over time with peak and slight decline in the latest quarter, indicating higher operational costs or sales volume fluctuations.

Inventories

Substantial and continuous growth, reflecting accumulation of stock and possible shifts in production or sales strategy.

Inventory Turnover Ratio

Decreasing trend, pointing to reduced efficiency in inventory movement and potentially slower sales velocity or overstocking.

In summary, the data shows expansion in cost and inventory levels juxtaposed with falling inventory turnover, highlighting potential risks related to inventory control and cash flow management that might require attention going forward.

The analyzed data reveals a consistent upward trend in revenues over the extended period, with figures increasing from approximately 1.52 billion US dollars at the end of March 2020 to a peak near 2.91 billion US dollars by the end of December 2024, before a slight dip to about 2.77 billion US dollars in March 2025. This steady growth reflects an overall expansion in the company's sales performance over the observed quarters.

Accounts receivable, net, demonstrates a broadly increasing trajectory in line with revenue growth, rising from roughly 845 million US dollars in the first quarter of 2020 to over 1.8 billion US dollars by December 2024. Some fluctuations are notable, such as a decrease near the close of 2024, but the general pattern suggests a growing volume of outstanding customer payments, which may be proportional to the increasing sales levels.

The receivables turnover ratio, available for certain periods starting in late 2020, shows some variability but remains relatively stable within a moderate range. Beginning at around 7.01 and fluctuating between approximately 5.68 and 7.19 over the periods observed, this ratio indicates that the company has maintained a consistent efficiency in collecting receivables despite the growing accounts receivable balance. A slight decline towards mid-2024 suggests marginally slower collections relative to sales during that time.

Revenue Analysis

Demonstrates sustained growth with total revenues nearly doubling over the analyzed period, indicating positive business development and market expansion.

Accounts Receivable

Increases roughly in line with revenue growth, showing larger outstanding receivables balances that could be reflective of higher sales volume or extended credit terms.

Receivables Turnover Ratio

Maintains a stable range, suggesting consistent efficiency in collections, though a subtle downward trend could signal a minor lengthening of collection periods or changes in customer payment behavior.

Overall, the financial data illustrates a growing enterprise with expanding sales and receivables, alongside relatively efficient management of accounts receivable. Close monitoring of the receivables turnover trends would be prudent to ensure collection practices remain effective as the company's scale continues to increase.

The data reveal several distinct trends in the cost of sales, accounts payable, and payables turnover over the observed periods. Cost of sales generally exhibits an upward trajectory, indicating an overall increase in the cost burden associated with goods or services sold. After starting at 162,497 thousand US dollars in the first quarter of 2020, the cost of sales steadily climbs, reaching a peak of 423,400 thousand US dollars by the end of 2024, before slightly declining to 363,000 thousand US dollars in the first quarter of 2025. This suggests an increasing scale of operations or rising input costs until late 2024, followed by a potential moderation.

Accounts payable demonstrate a fluctuating yet generally increasing pattern across the same timeframe. Initially recorded at 100,703 thousand US dollars in the first quarter of 2020, accounts payable increase notably towards the later part of the dataset. Noteworthy is the significant jump from 126,900 thousand US dollars in the third quarter of 2022 to 303,900 thousand US dollars in the fourth quarter of 2022. This sharp rise continues with an increase to 445,000 thousand US dollars by the first quarter of 2025, indicating an expanding obligation to suppliers or delayed payments possibly reflecting changes in credit terms or working capital management.

The payables turnover ratio shows marked variability throughout the periods, suggesting changes in how quickly payables are settled relative to purchase volumes. Early in the series, the ratio moves from values like 4.75 up to 8.23, reflecting faster turnover at some points, particularly in late 2021. However, from 2022 onward, the ratio tends to decline, reaching values in the range of approximately 3.1 to 4.3. This downward trend in payables turnover may imply lengthening payment cycles or slower settlement of payables relative to the cost of sales, which could correspond with the observed rising accounts payable balances.

Overall, the data indicate growing operational scale and cost levels alongside increasing accounts payable balances. The declining payables turnover ratio over the later quarters may suggest a strategic extension of payment terms or temporary liquidity considerations. Monitoring these trends in conjunction with broader financial measures would be important for assessing the company's working capital efficiency and financial health moving forward.

Working Capital

The working capital generally exhibits a rising trend from March 31, 2020, through December 31, 2022, increasing from approximately 3.9 billion USD to nearly 10.5 billion USD. There is some fluctuation afterward, with values around 10.6 billion USD at December 31, 2023, followed by a notable decline to approximately 5.4 billion USD in June 30, 2024. Subsequently, there is a mild recovery toward the end of the period, ending near 6.2 billion USD by March 31, 2025. This pattern indicates a period of accumulating current assets over the initial years, a dip mid-term, and partial stabilization later on.

Revenues

Revenues steadily increase from about 1.5 billion USD in the first quarter of 2020 to a peak of roughly 2.9 billion USD in December 31, 2024. Some minor volatility is apparent in the most recent quarters, with revenue slightly decreasing to around 2.77 billion USD by March 31, 2025. The overall trajectory shows consistent revenue growth over the examined timeframe, reflecting expanded sales or operational scale despite periodic fluctuations.

Working Capital Turnover Ratio

This ratio, which measures the efficiency of working capital in generating revenue, starts near 0.99 in March 31, 2020, and remains close to 1 through 2021. It then gradually decreases, reaching lows around 0.85 to 0.9 during late 2022 and early 2023, indicating less efficient use of working capital during this period. Beginning in mid-2023, the ratio shows a sharp increase, peaking significantly at 1.92 in June 30, 2024, before slightly declining but remaining elevated above 1.7 through March 31, 2025. This rising ratio in the latter periods signals improved effectiveness in utilizing working capital to support revenue generation, especially contrasted with the prior period's dip.

Overall Analysis

The data reveals a company experiencing steady revenue growth over five years alongside initially increasing working capital, suggesting expansion and investment in current assets. However, the subsequent decline in working capital after December 2023, paired with a rising working capital turnover ratio, suggests a strategic optimization or reduction in working capital while sustaining or improving sales efficiency. The elevated turnover ratio after mid-2023 reflects enhanced capital management effectiveness, potentially indicating better inventory control, receivables management, or other operational improvements leading to higher revenue generation per unit of working capital employed.

The inventory turnover ratio exhibits a general declining trend from early 2021 through the first quarter of 2025. Starting at 2.62 in March 2021, the ratio gradually decreases to 1.14 by March 2025. This steady decline indicates a reduction in the frequency with which inventory is sold and replenished over the observed periods.

Correspondingly, the average inventory processing period reflects an increasing trend over the same timeframe. Beginning at approximately 139 days in March 2021, the processing period extends to 320 days by March 2025. This increase suggests that inventory is held for longer periods before being processed or sold.

Inventory turnover ratio

Shows a consistent decrease from 2.62 in March 2021 to 1.14 in March 2025, indicating slower inventory movement over time.

Average inventory processing period

Increases from 139 days in March 2021 to 320 days by March 2025, suggesting lengthening inventory holding periods.

This inverse relationship between inventory turnover and processing period is typical, as a lower turnover ratio generally corresponds with longer inventory holding times. The observed trend may reflect challenges in inventory management, possible changes in demand, or operational inefficiencies that result in slower inventory cycles. Monitoring these metrics closely would be advisable to address potential impacts on working capital and overall operational performance.

The receivables turnover ratio exhibits fluctuations over the observed quarters, initiating from a value of 7.01 and experiencing a decline to a low of approximately 5.68 before recovering somewhat towards the later periods. This indicates variability in how efficiently receivables are collected over time.

Correspondingly, the average receivable collection period, expressed in days, inversely mirrors this trend. Starting at 52 days, it increases to a peak of 64 days in the middle to later quarters, suggesting that on average, the time taken to collect receivables has lengthened before showing signs of marginal improvement toward the end of the period.

Receivables Turnover Ratio

Initially strong at around 7.01, the ratio dips significantly to below 6.0 in some quarters, indicating slower turnover of receivables.

The ratio then stabilizes somewhat, with minor increases observed in the latest periods, suggesting an improvement in collection efficiency.

This trend reflects variability in credit management and collection processes throughout the quarters.

Average Receivable Collection Period

Starting at 52 days, this metric increases steadily to a peak of approximately 64 days, indicating a lengthening of the collection period.

In more recent quarters, the collection period shortens slightly but remains elevated relative to the initial period.

The movement in this metric confirms a trend of slower receivable conversion into cash during the mid-periods, potentially impacting liquidity.

Overall, the data indicates a period where receivables are collected less efficiently, characterized by a lower turnover ratio and increased collection days, with some recovery noted toward the end of the timeframe. Monitoring and improving collection practices during high average collection periods could enhance financial performance and cash flow stability.

The analysis of the quarterly financial metrics reveals notable trends in the company's inventory management, receivable collection, and overall operating cycle over the observed periods.

Average Inventory Processing Period

This metric shows a consistent upward trajectory from the beginning of 2021 through to early 2025. Starting at 139 days at the end of the first quarter of 2021, the inventory processing period gradually extended to 320 days by the first quarter of 2025. This increase signifies a lengthening duration for inventory turnover, which could indicate slower inventory movement or increased stock levels. The steady rise post-2021, with few fluctuations, suggests an evolving operational focus or possible challenges in inventory management efficiency.

Average Receivable Collection Period

The receivable collection period shows relative stability with mild fluctuations throughout the quarters. Values oscillate primarily between 51 and 64 days, without a clear upward or downward long-term trend. Minor peaks around 61 to 64 days are observed in mid to late 2023 and mid-2024, but these variations remain within a modest range. The steadiness in this period indicates consistent credit and collection policies over time.

Operating Cycle

The operating cycle demonstrates a pattern similar to the inventory processing period, with a clear increasing trend over the observed timeline. From a baseline close to 191 days at the start of 2021, the cycle extends noticeably to 379 days by the first quarter of 2025. This elongation reflects the combined effect of lengthening inventory turnover and relatively stable receivable collections, resulting in a prolonged overall cash conversion cycle. The operating cycle's growth could signal potential liquidity constraints or a strategic shift toward holding more inventory before sale.

In summary, the data points to an elongation in the time inventory is held, which directly impacts the overall operating cycle. Meanwhile, the consistency in receivable collection suggests that the company’s credit management remains steady despite the changes in inventory dynamics. Attention to inventory turnover efficiency may be warranted to optimize working capital and overall operational performance.

The analysis of the payables turnover ratio and the average payables payment period over the observed quarters reveals notable fluctuations and trends.

Payables Turnover Ratio

The payables turnover ratio begins at a value of 4.75 in the earliest available period and increases steadily to a peak of 8.23 by Dec 31, 2022. This indicates an improvement in the rate at which the company settles its payables during this time frame. However, after reaching this peak, the ratio sees a significant decline, falling to around 3.13 in Dec 31, 2021 and fluctuating between 3.13 and 4.27 in subsequent periods up to Mar 31, 2025. The recent trend suggests a slower turnover of payables compared to its peak, reflecting that the company may be taking longer to pay its obligations or managing its payables differently.

Average Payables Payment Period

This metric inversely mirrors the payables turnover trend. It starts at 77 days initially and decreases to a low of 44 days at Dec 31, 2021, suggesting accelerated payment to suppliers. However, subsequent periods show a marked and steady increase reaching a peak of 117 days at Dec 31, 2023. Afterward, the period decreases slightly but remains elevated around 85 to 105 days on average through Mar 31, 2025. The rising average payment period implies that the company is generally extending the time it takes to pay its creditors, which could impact supplier relations but might also be a deliberate cash flow management tactic.

Overall, the data demonstrates a shift in accounts payable management strategies over the observed quarters, initially moving towards faster payments but reversing to slower payment pacing in later periods. The peaks and troughs in both ratios highlight a dynamic approach to payables possibly influenced by operational, financial, or market conditions.

The analysis of the provided financial ratios over the specified periods reveals notable trends in the company's working capital management and cash flow efficiency.

Average Inventory Processing Period

This metric shows a consistent increasing trend from March 2021 onwards, starting at 139 days and rising steadily to 320 days by March 2025. This indicates that the company is taking longer to convert its inventory into sales, suggesting potentially slower inventory turnover or increased stock levels over time.

Average Receivable Collection Period

The receivable collection period remains relatively stable throughout the periods, fluctuating mildly between 51 to 64 days. This stability suggests that the company's credit and collection policies have been fairly consistent, maintaining similar efficiency in collecting receivables from customers without significant deterioration or improvement.

Average Payables Payment Period

This period shows notable variability, with a high of 117 days at December 2021 and a low of around 44 days at December 2022. After the peak, there is a general decline but the payment period remains elevated compared to early periods. The fluctuations suggest active management or variability in supplier payment terms and cash flow strategies, possibly extending payables during some quarters to optimize liquidity.

Cash Conversion Cycle

The cash conversion cycle, which measures the overall efficiency of the company's working capital management, has exhibited an increasing trend from 114 days in March 2021 to 274 days by March 2025. This upward movement correlates with the lengthening inventory processing period and variable payables period, indicating a lengthening time in converting investments in inventory and receivables back into cash. Such a trend could imply worsening liquidity efficiency or strategic choices to hold more working capital.

In summary, the company appears to be experiencing a gradual slowdown in inventory turnover while maintaining stable receivable collections. Payables management shows considerable fluctuations, reflecting tactical adjustments or external influences. The overall cash conversion cycle lengthens significantly over time, which may warrant review to mitigate potential liquidity risks or inefficiencies.