Allegro Microsystems Inc (ALGM)

Cash conversion cycle

		Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 23, 2022	Sep 23, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021
Days of inventory on hand (DOH)	days	87.74	92.37	105.51	112.65	97.12	78.39	64.41	58.00	60.90	56.56	52.46	61.56
Days of sales outstanding (DSO)	days	41.45	38.98	40.65	43.03	53.20	51.65	51.53	55.51	54.47	52.13	50.26	56.71
Number of days of payables	days	19.44	21.00	38.16	42.29	36.11	32.74	26.58	22.49	21.09	24.52	19.60	25.94
Cash conversion cycle	days	109.74	110.35	108.00	113.40	114.21	97.30	89.36	91.01	94.28	84.17	83.12	92.33

March 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 87.74 + 41.45 – 19.44
= 109.74

The cash conversion cycle of Allegro Microsystems Inc has shown varying trends over the past few quarters. The cycle represents the time it takes for the company to convert its investments in inventory back into cash, indicating the efficiency of its working capital management.

The company's cash conversion cycle ranged from a low of 83.12 days in the third quarter of 2021 to a high of 114.21 days in the first quarter of 2023. Generally, a shorter cash conversion cycle is favorable as it indicates that the company is able to quickly convert its resources into cash.

The upward trend in the cash conversion cycle from Q3 2021 to Q1 2023 suggests potential challenges in managing inventory, collecting receivables, and paying payables efficiently. This may indicate inefficiencies in working capital management during that period.

However, a slight decrease in the cash conversion cycle in the most recent quarter (Q1 2024) compared to the preceding quarter is a positive sign, indicating potential improvements in working capital management practices.

Overall, Allegro Microsystems Inc should continue monitoring and optimizing its cash conversion cycle to ensure efficient working capital management and maximize cash flow generation.