Digi International Inc (DGII)

Cash conversion cycle

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Days of inventory on hand (DOH)	days	140.96	155.44	112.92	139.12	107.38
Days of sales outstanding (DSO)	days	45.95	47.43	51.73	77.41	81.01
Number of days of payables	days	32.49	68.72	58.07	75.72	57.20
Cash conversion cycle	days	154.41	134.15	106.58	140.81	131.18

September 30, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 140.96 + 45.95 – 32.49
= 154.41

The cash conversion cycle (CCC) measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. It's an important indicator of operational efficiency and liquidity management.

For Digi International, Inc., the cash conversion cycle has been fluctuating over the past five years, as follows:

- September 30, 2023: 156.69 days
- September 30, 2022: 136.91 days
- September 30, 2021: 108.37 days
- September 30, 2020: 142.98 days
- September 30, 2019: 132.31 days

The rising trend in the cash conversion cycle from 2019 to 2020, followed by a reduction in 2021 and another increase in 2022, indicates fluctuations in the company's efficiency in managing its working capital and turning it into cash.

A longer cash conversion cycle means that the company takes more time to realize cash from its investments in inventory and accounts receivable. This can indicate inefficiencies in inventory management, longer time to collect receivables, or delays in paying suppliers.

Conversely, a shorter cash conversion cycle is generally preferred, as it signifies that the company is able to generate cash flows from its operational activities more quickly.

It would be beneficial for the company to closely analyze the reasons behind these fluctuations and take appropriate measures to streamline its working capital management. By optimizing inventory levels, improving accounts receivable collection processes, and negotiating favorable payment terms with suppliers, Digi International, Inc. can work towards reducing its cash conversion cycle, thereby enhancing its liquidity and operational efficiency.