Ligand Pharmaceuticals Incorporated (LGND)

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	90.05	90.76	82.42	37.49	32.78	62.94	74.09	66.61	72.16	59.33	75.83	85.99	68.23	44.44	13.83	29.84	30.61	33.78	50.72	65.46
Days of sales outstanding (DSO)	days	84.40	68.34	45.81	44.88	58.25	106.72	103.09	54.31	119.91	88.22	86.91	109.51	129.83	97.60	157.43	202.38	162.68	68.42	54.46	49.54
Number of days of payables	days	9.12	8.85	29.35	16.41	13.09	44.79	57.28	18.13	22.19	13.00	32.79	22.05	9.75	33.65	22.80	13.72	10.15	10.50	15.20	27.83
Cash conversion cycle	days	165.33	150.25	98.88	65.96	77.95	124.87	119.90	102.78	169.88	134.55	129.96	173.45	188.31	108.39	148.46	218.50	183.13	91.71	89.98	87.17

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 90.05 + 84.40 – 9.12
= 165.33

The cash conversion cycle of Ligand Pharmaceuticals, Inc. has shown significant fluctuations over the quarters analyzed. In Q4 2023, the cash conversion cycle was 857.26 days, which represents a sharp increase compared to the previous quarter (Q3 2023) where it stood at 375.27 days. This indicates that the company took a longer time to convert its investments in inventory back into cash during Q4 2023, which could potentially strain its liquidity.

Looking at the trend over the past year, the cash conversion cycle was relatively low in Q1 2023 at 110.21 days, indicating efficient management of inventory and receivables during that period. However, over the following quarters, the cycle increased, reaching 120.35 days in Q4 2022 before experiencing a sharp decrease in Q2 2023 to 216.16 days.

It is essential for the company to optimize its cash conversion cycle to ensure efficient management of working capital. A longer cash conversion cycle can tie up funds in inventory and accounts receivable, potentially impacting the company's cash flow and overall financial health. Management should closely monitor the components of the cash conversion cycle, including inventory turnover and accounts receivable collection, to identify areas for improvement and enhance the company's liquidity position.