Duolingo Inc (DUOL)

Cash conversion cycle

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021
Days of inventory on hand (DOH)	days	—	128.63	—
Days of sales outstanding (DSO)	days	61.15	46.16	48.27
Number of days of payables	days	6.29	4.32	41.24
Cash conversion cycle	days	54.86	170.47	7.02

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 61.15 – 6.29
= 54.86

The cash conversion cycle of Duolingo Inc has shown significant fluctuations over the past three years.

At Dec 31, 2021, the company had a very efficient cash conversion cycle of 7.02 days, indicating that it was able to convert its investments in inventory and accounts receivable into cash quickly. This short cycle suggests strong liquidity management and efficient working capital utilization.

However, by Dec 31, 2022, the cash conversion cycle increased significantly to 170.47 days, which may indicate issues with managing inventory, collecting receivables, or delaying payments to suppliers. A prolonged cash conversion cycle can tie up cash in the operating cycle, potentially impacting the company's liquidity and ability to fund its operations.

By Dec 31, 2023, Duolingo Inc was able to reduce its cash conversion cycle to 54.86 days, showing improvement from the previous year but still higher than the exceptional performance in 2021. The company may have made efforts to optimize its working capital management processes to streamline cash flow and operating efficiency.

Overall, the fluctuation in Duolingo Inc's cash conversion cycle over the three years highlights the importance of closely monitoring working capital metrics to ensure optimal cash flow management and operational performance.