Cadence Design Systems Inc (CDNS)

Inventory turnover

		Dec 31, 2024	Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020
Cost of revenue	US$ in thousands	210,902	435,041	371,623	307,006	305,498
Inventory	US$ in thousands	257,711	181,661	128,005	115,721	75,956
Inventory turnover		0.82	2.39	2.90	2.65	4.02

December 31, 2024 calculation

Inventory turnover = Cost of revenue ÷ Inventory
= $210,902K ÷ $257,711K
= 0.82

Cadence Design Systems Inc's inventory turnover has shown a declining trend over the past five years. In December 31, 2020, the inventory turnover was 4.02, indicating that the company's inventory was being turned over approximately four times during that year. Subsequently, the inventory turnover decreased to 2.65 by December 31, 2021, and further to 2.90 by December 31, 2022.

However, from December 31, 2022 to December 31, 2023, there was a notable drop in inventory turnover to 2.39, suggesting a decrease in the efficiency of inventory management. By December 31, 2024, the inventory turnover had decreased significantly to 0.82, reflecting a substantial decline in the rate at which the company's inventory was being sold.

The decreasing trend in inventory turnover may indicate challenges in managing inventory levels efficiently, potentially leading to carrying excess inventory or facing difficulties in selling existing inventory. Companies often aim for a balance in inventory turnover to avoid stockouts while also preventing excess inventory buildup. Cadence Design Systems Inc may need to reassess its inventory management practices to optimize working capital utilization and enhance operational efficiency.