KLA-Tencor Corporation (KLAC)

Short-term

Turnover ratios

The activity ratios of KLA-Tencor Corporation over the reported periods reflect several notable trends and insights into its operational efficiency.

Inventory Turnover: This ratio demonstrates a consistent decline from a high of approximately 1.77 in September 2020 to a low of around 1.27 in June 2024, with a slight uptick to 1.48 in June 2025. The decrease indicates a lengthening of inventory holding periods over time, suggesting that inventory is turning over less frequently. Factors may include inventory buildup due to supply chain adjustments, changes in inventory management strategies, or shifts in product demand. The recent slight recovery hints at efforts to optimize inventory levels.

Receivables Turnover: This ratio shows a general upward trend from around 5.77 in September 2020 to approximately 5.79 in September 2023, with fluctuations thereafter. The increase suggests an improvement in accounts receivable collection efficiency, resulting in faster cash collection from customers. Variations could reflect seasonal customer payment behaviors or adjustments in credit policies.

Payables Turnover: Notably volatile, the payables turnover surged sharply from 9.69 in September 2020 to peaks above 11 in 2023, indicating a reduction in the average payment period to suppliers and potentially a strategic shift towards faster payments or improved cash management. The initial high ratio followed by fluctuations suggests reactive adjustments to operating cash flow considerations or supplier negotiations.

Working Capital Turnover: Fluctuating within a narrower range, this ratio increased from approximately 1.97 in September 2020 to a peak of about 2.31 in March 2023, then declining slightly. This suggests increasing efficiency in utilizing working capital to support sales during the period, although the recent decline indicates a possible stabilization or slight reduction in asset utilization efficiency.

In summary, KLA-Tencor’s activity ratios depict a period of operational adjustment. The declining inventory turnover indicates longer inventory cycles, while improving receivables and fluctuating payables ratios reflect ongoing efforts to enhance cash flow management and working capital efficiency. The overall trend suggests a strategic balancing act between maintaining inventory levels, managing receivables, and optimizing payables to support sustainable growth and operational effectiveness.

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Average number of days

The activity ratios of KLA-Tencor Corporation, specifically Days of Inventory on Hand (DOH), Days of Sales Outstanding (DSO), and the Number of Days of Payables, present evolving patterns over the analyzed period from September 2020 through June 2025.

Days of Inventory on Hand (DOH):
The data indicates a consistent increase in inventory holding periods over time. Starting at approximately 206.37 days in September 2020, the DOH gradually extended, reaching a peak of around 286.90 days by June 2024. This trend suggests that the company has been holding onto inventory for progressively longer durations, which could imply slower inventory turnover, potential accumulation of stock, or strategic inventory buffering, possibly in response to supply chain considerations or anticipated demand fluctuations. Post-June 2024, a slight reduction is observed, with DOH decreasing to roughly 246.73 days by June 2025, yet values remain significantly higher than initial levels, indicating an overall lengthening of inventory cycle times over the analyzed period.

Days of Sales Outstanding (DSO):
The company's receivables collection period has shown variability but generally remained within a moderate range. Initially at around 63.31 days in September 2020, the DSO escalated to approximately 81.58 days by December 2021, then decreased further to about 66.63 days in March 2023. In subsequent periods, the DSO has fluctuated between approximately 63.08 days and 78.62 days, with a slight upward trend towards the later years. This pattern indicates that the company’s receivables collection cycle has been relatively stable with some short-term variability, possibly reflecting changes in credit policies or client payment behaviors. Overall, the DSO reflects a manageable receivables period that, despite fluctuations, does not suggest significant deterioration in collection processes.

Number of Days of Payables:
The company’s payables deferral period started at around 37.66 days in September 2020 and generally decreased to its lowest point of approximately 32.10 days in June 2023. A slight increase occurs thereafter, reaching around 35.22 days by June 2025. The trend indicates that KLA-Tencor has maintained a relatively stable payable period, with some fluctuations. The decrease in payables days during 2021 and part of 2023 could demonstrate efforts to manage cash outflows more efficiently. The slight increase in later periods may reflect changes in vendor terms or strategic payment scheduling.

Summary:
Overall, the activity ratios depict a pattern of increasing inventory holding durations, relatively stable but somewhat fluctuating receivables collection periods, and a generally stable payables schedule with minor variations. Higher DOH values over time suggest an accumulation or slower turnover of inventory, which may warrant further operational scrutiny. Meanwhile, the consistent DSO and payables periods indicate steady credit and payment practices. These trends collectively suggest shifts possibly driven by strategic, operational, or supply chain considerations, affecting the working capital cycle components of KLA-Tencor.

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See also:

KLA-Tencor Corporation Short-term (Operating) Activity Ratios (Quarterly Data)

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Long-term

The analysis of KLA-Tencor Corporation's long-term activity ratios reveals several notable trends over the observed periods.

The fixed asset turnover ratio demonstrates a generally high level of efficiency in utilizing fixed assets to generate sales, with values consistently exceeding 10 from September 2020 through June 2023. This indicates that the company effectively leverages its property, plant, and equipment to produce revenue. The ratio experienced a slight upward trend from 10.56 in September 2020 to a peak of 10.87 in December 2022, suggesting incremental improvements in fixed asset utilization during this period. A minor decline is observed in the subsequent quarters, dropping to 10.17 by June 2023, but data beyond this point is not available for the later periods.

The total asset turnover ratio displays a steady upward trend over the same timeframe, increasing from 0.64 in September 2020 to a peak of 0.76 in March and June 2025. This indicates an overall enhancement in the efficiency of the company's total assets in generating sales revenue over time. The ratio shows gradual growth with minor fluctuations, reflecting effective management of both fixed and current assets to support sales growth.

In summary, KLA-Tencor has exhibited a consistent and positive trajectory in its long-term activity ratios, underscoring sustained efficiency in asset utilization. The improvements in both fixed asset and total asset turnover ratios suggest that the company's operational efficiency and asset management strategies have been effective in supporting revenue generation over the analyzed periods.

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See also:

KLA-Tencor Corporation Long-term (Investment) Activity Ratios (Quarterly Data)