Charles River Laboratories (CRL)

Cash conversion cycle

		Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 31, 2022	Sep 30, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021	Mar 31, 2021	Dec 31, 2020	Sep 30, 2020	Jun 30, 2020	Mar 31, 2020	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Days of inventory on hand (DOH)	days	101.16	78.78	77.00	74.36	112.87	125.16	128.92	105.78	95.73	87.56	96.92	102.44	102.25	102.13	95.11	92.59	93.59	96.42	86.67	86.37
Days of sales outstanding (DSO)	days	69.52	67.45	67.90	—	66.88	74.93	74.84	71.55	68.61	72.32	74.09	76.04	78.84	75.65	72.05	74.12	72.28	76.33	82.51	77.24
Number of days of payables	days	44.94	36.66	37.84	33.98	90.86	86.92	106.13	108.07	95.24	61.64	55.32	67.28	67.44	54.49	46.87	58.36	64.95	66.48	63.84	52.26
Cash conversion cycle	days	125.74	109.57	107.06	40.38	88.89	113.17	97.63	69.25	69.10	98.24	115.69	111.20	113.65	123.30	120.29	108.35	100.92	106.27	105.34	111.35

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 101.16 + 69.52 – 44.94
= 125.74

The cash conversion cycle is a measure of how quickly a company can convert its investments in inventory into cash flows from sales. A shorter cash conversion cycle indicates more efficient operations and better liquidity management.

Analyzing the cash conversion cycle of Charles River Laboratories over the past few quarters, it is evident that there have been fluctuations in the efficiency of the company's working capital management.

In the most recent quarter, ending on December 31, 2023, the cash conversion cycle increased significantly to 125.74 days. This was driven by a notable increase in the number of days it took the company to convert inventory into sales and eventually into cash. This suggests a potential slowdown in sales or challenges in managing inventory turnover efficiently during this period.

Conversely, in the first quarter of 2023, the cash conversion cycle was notably lower at 40.38 days, indicating a more efficient working capital cycle. It is worth noting that this rapid conversion of investments into cash highlights effective inventory management and faster sales collection.

Overall, monitoring the trend of the cash conversion cycle is crucial for assessing Charles River Laboratories' operational efficiency and cash flow management. A decreasing trend over time would be desirable, indicating improved working capital management and potentially leading to enhanced financial performance and liquidity in the long term.