Humana Inc. (NYSE:HUM)

Receivables Turnover

The receivables turnover ratio exhibits significant volatility throughout the periods analyzed. Initially, it decreased from 33.43 in early 2020 to a low of 31.3 but then spiked sharply to 66.78 by the end of 2020. This pattern repeated in subsequent years, with marked increases in some quarters followed by steep declines in others. For example, after reaching 55.25 at the end of 2022, it peaked at 68.53 in mid-2023 before tapering off to 53.07 by late 2024. These fluctuations indicate variability in the efficiency of collecting receivables, with periods of both enhanced and diminished turnover speeds.

Payables Turnover

Payables turnover exhibited relative stability with modest upward trends over the timeframe. Values mostly ranged between 7.1 and 8.8, with a gradual increase toward the latter periods. The ratio improved slightly from 7.9 in early 2020 to 8.81 by late 2024, suggesting a consistent or improving ability to pay off suppliers in a timely manner. The small incremental increases imply controlled management of payable obligations.

Working Capital Turnover

Working capital turnover showed an overall upward trend with some fluctuations. It started around 6.9 in early 2020 and increased steadily, peaking at 10.54 near the end of 2022. After this peak, a slight decline and some variability occurred, stabilizing just above 8 by late 2024. This trend reflects improving utilization of working capital to generate revenue over time, though some recent moderation suggests a possible plateau or more cautious management of resources.

Average Receivable Collection Period

The average collection period exhibited inverse trends relative to receivables turnover, as expected. Periods with high turnover correlated with shorter collection days. Initially, collection days were around 11 to 12 days, dropping to as low as 5 to 7 days during quarters with high turnover ratios such as late 2020 and mid-2023. Conversely, during periods when turnover was low, the collection period extended to around 13 to 14 days, indicating variability in collections efficiency across quarters.

Average Payables Payment Period

The average payment period remained relatively steady, fluctuating mostly between 41 and 51 days. Slight downward trends are seen over the longer term, with the period decreasing from 46 days in early 2020 to low 40s by late 2024. This suggests marginally faster payments to suppliers in recent periods, contributing to the slight increase in payables turnover.

Summary of Trends

The analysis reveals a pattern of volatility in the receivables turnover and collection periods, indicative of varying efficiency in managing receivables. Conversely, payables turnover and payment periods show relative stability with mild improvements, reflecting consistent supplier payment practices. Working capital turnover trends generally upward, indicating enhanced effectiveness in resource utilization, although recent slight declines merit attention. Overall, the data suggest a dynamic management environment with areas of strength in working capital and payables management, counterbalanced by fluctuating receivables efficiency.

External Revenues

Over the analyzed periods, external revenues exhibit a generally upward trend with notable fluctuations. Starting around 18,786 million USD at the end of March 2020, revenues experience minor increases through 2020, reaching approximately 21,088 million USD by December 2021. A pronounced growth phase occurs in early 2022, with revenues rising sharply to peaks exceeding 26,000 million USD by early 2023. After stabilizing around this level through 2023, revenues surge again in early 2024, approaching nearly 29,300 million USD by June 2024, slightly declining thereafter. This pattern suggests periods of strong revenue growth interspersed with phases of minor decline or stabilization.

Receivables, Less Allowances

The receivables balance demonstrates high volatility across the quarters. Initial values range around 2,000 million USD in early 2020, but a steep decline is observed by September and December 2020, dropping to near 1,100 million USD. A recovery occurs heading into mid-2021 with figures increasing above 2,400 million USD, followed by fluctuations and another significant decrease around late 2022. In 2023 and early 2024, receivables again exhibit a cyclical pattern, with some quarters experiencing sharp increases followed by marked decreases. These fluctuations imply variability in collection or billing practices and potentially reflect changing credit terms or customer payment behavior.

Receivables Turnover

Receivables turnover ratios mirror the inverse of the receivables balances, indicating changes in the speed of collections. High turnover rates, such as those exceeding 60 during some quarters (notably September and December 2020, September 2022, and mid-2023), correspond to quarters with lower receivables amounts, pointing to faster collections. Conversely, turnover ratios dip into the mid-20s during quarters with higher receivables balances, such as in early 2022 and mid-2024, suggesting slower turnover and potentially extended collection periods. This cyclical pattern emphasizes the variability in cash conversion efficiency, with certain periods reflecting tighter receivables management or more favorable payment terms.

Benefits

The benefits expense exhibited a generally upward trend throughout the observed periods, starting at $15,629 million in Q1 2020 and reaching $25,120 million by Q3 2024. There were fluctuations within individual quarters, with occasional slight decreases as seen in Q3 2022 and Q3 2023, but the overall trajectory indicates sustained growth in benefits payout over time.

Benefits Payable

The benefits payable followed a similar increasing trend as benefits, rising from $7,090 million in Q1 2020 to $11,125 million by Q3 2024. Some quarterly variability was observed, including a moderate decline in certain intervals such as Q4 2021 and Q3 2024. However, the general pattern points to an increasing liability in benefits payable consistent with the growth in total benefits.

Payables Turnover Ratio

The payables turnover ratio fluctuated between approximately 7.1 and 8.8 throughout the period. It showed periods of both decline and improvement, peaking at 8.81 in Q3 2024. After some sporadic declines during 2020 and 2021, there is a discernible improvement trend in payment efficiency in the latter part of the timeline, indicating a potentially quicker settlement of payables relative to the benefits payable balance.

Working Capital

Working capital exhibited fluctuations over the observed periods. Starting at 9,721 million USD at the end of Q1 2020, it increased to a peak of 12,126 million USD by Q3 2020, before declining to 9,562 million USD by the end of 2021. In 2022, the value remained relatively stable around 9,000 million USD but increased steadily during 2023 and into early 2024, reaching the highest observed value of 14,199 million USD by Q3 2024. This suggests an overall trend of working capital growth toward the most recent quarters, after a period of volatility and decline through 2020-2021.

External Revenues

External revenues showed consistent growth over the entire period. From 18,786 million USD in Q1 2020, revenues rose steadily with some minor fluctuations, reaching 21,088 million USD by Q4 2021. The upward trend accelerated significantly in 2022 and onward, with external revenues surging to 26,549 million USD in Q1 2023 and peaking at 29,323 million USD in Q1 2024. This indicates sustained revenue growth, particularly strong in the most recent years despite occasional quarter-to-quarter variability.

Working Capital Turnover

The working capital turnover ratio, which measures revenue generated per unit of working capital, remained fairly dynamic throughout the timeline. It started at 6.91 in Q1 2020, decreasing to a low of around 6.04 in Q3 2020. From then on, it generally increased, reaching a peak of 10.54 in Q3 2022. After this peak, the ratio stabilized and slightly decreased, fluctuating between 8.01 and 9.72 in 2023 up to mid-2024. These fluctuations suggest periods of improving efficiency in utilizing working capital, particularly in 2021 and early 2022, with a modest tapering in the most recent quarters.

Overall Insights

The data reveals an improving operational scale and working capital management over the long term. External revenues have consistently grown, indicating strong market demand or successful business expansion. Meanwhile, working capital levels, after some volatility, show a trend toward overall increase, possibly reflecting business scaling or increased investment in operational assets. The working capital turnover ratio corroborates this by highlighting periods of enhanced efficiency in the use of working capital, although the more recent decline may suggest a cautious deployment or changes in operational strategy.

The analysis of the quarterly financial data reveals notable fluctuations and cyclical patterns in the receivables turnover ratio and the average receivable collection period over the observed periods.

Receivables Turnover Ratio

The receivables turnover ratio demonstrates significant variability throughout the time frame. During the year 2020, the ratio initially decreased from 33.43 to 31.3, then sharply increased to peak levels of 64.58 and 66.78 in the third and fourth quarters, indicating a rapid collection of receivables in the later part of that year. In 2021, the turnover ratio generally declined, reaching a low in the second quarter before rising moderately toward the end of the year, peaking again at 45.69.

In 2022, a similar pattern emerges with the turnover ratio dropping substantially in the first half of the year to around 26.54-27.18, followed by a substantial rise peaking at 56.74 before tapering to around 55.25. The year 2023 shows sharp variation again, with turnover readings swinging between low 30s and late 60s, reflecting inconsistent collection efficiency across quarters. The initial quarters of 2024 show a return to the earlier pattern of a lower turnover ratio around 27, rising to above 53 by the third quarter.

Average Receivable Collection Period

The average collection period inversely mirrors the turnover ratio as expected, with shorter collection periods corresponding to higher turnovers and vice versa. Early 2020 saw moderate collection periods around 11-12 days, which sharply decreased to 5-6 days in the second half of 2020, consistent with increased receivables turnover. The year 2021 saw slight lengthening of collection days to 8-11 days, suggesting slower collections.

In 2022, the collection period lengthened notably to 13-14 days in the first half, then decreased again to 6-7 days, paralleling turnover fluctuations. The year 2023 exhibited more volatile collection periods, swinging between 5 and 12 days, matching turnover variability. The early quarters of 2024 reflect a lengthening in collection periods back to 13 days followed by a reduction to 7 days by the third quarter.

Overall, the data reflect a cyclical trend in both receivables turnover and collection period, with recurring phases of rapid collection followed by slower collection phases. These fluctuations may indicate seasonal or operational factors influencing the company's ability to collect receivables efficiently across different quarters. The sharp peaks and troughs emphasize variability in working capital management that might warrant further investigation to identify underlying causes and potential optimization opportunities.

Payables Turnover

The payables turnover ratio demonstrates a generally stable to improving trend over the full period analyzed. Beginning at 7.9 at the start of 2020, it experienced a slight decline in the subsequent quarters of that year, fluctuating between approximately 7.1 and 7.8. At the end of 2020, a noticeable upward trend emerged, with the ratio increasing to levels above 8.0 in late 2021 and sustaining values mostly above 7.8 thereafter. The most recent data points into mid-2024 reveal the highest turnover ratios in the span, approaching 8.8, indicating increasing efficiency in payables management.

Average Payables Payment Period

The average payment period in days exhibits some volatility but shows signs of gradual improvement in the length of time taken to settle payables. Initially, the payment period increased from 46 days in the first quarter of 2020 to a peak range of around 50-51 days during certain quarters in 2020 and 2021, implying slower payments. However, from late 2021 onwards, a consistent decrease is observed, with the period shortening to approximately 41 days by the third quarter of 2024. This trend signifies an improvement in payment efficiency and a reduction in the average time the company takes to pay its suppliers.

Summary of Trends and Insights

The data collectively points to enhanced payables management over the analyzed timeframe. The increasing payables turnover ratios coupled with the diminishing average payment periods suggest that the company is managing its payables more effectively, improving liquidity and possibly strengthening supplier relationships by making payments more promptly. The gradual and sustained improvement in these metrics from 2021 through mid-2024 indicates a positive trend toward operational efficiency in accounts payable processes.