Otter Tail Corporation (OTTR)

Cash conversion cycle

		Dec 31, 2024	Sep 30, 2024	Jun 30, 2024	Mar 31, 2024	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
Days of inventory on hand (DOH)	days	107.03	100.07	107.85	101.21	105.39	116.14	112.24	105.14	97.93	92.98	94.07	98.15	138.85	160.27	294.00	5,817.47	6,528.28	5,580.38	5,843.78	5,324.04
Days of sales outstanding (DSO)	days	40.59	51.05	51.79	52.95	42.99	52.85	52.42	45.19	36.27	47.76	58.29	61.45	53.88	61.00	60.46	55.09	48.43	51.14	45.91	49.20
Number of days of payables	days	81.64	58.04	84.61	62.95	66.48	84.33	81.33	67.94	70.05	77.49	85.32	80.09	126.32	189.39	374.44	7,117.03	8,543.68	12,904.64	8,722.43	5,397.22
Cash conversion cycle	days	65.97	93.08	75.03	91.22	81.90	84.66	83.33	82.39	64.16	63.25	67.04	79.51	66.41	31.89	-19.98	-1,244.47	-1,966.97	-7,273.12	-2,832.74	-23.97

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 107.03 + 40.59 – 81.64
= 65.97

The cash conversion cycle of Otter Tail Corporation has shown fluctuations over the periods analyzed. The company's cash conversion cycle was notably negative during the first half of 2020 and 2021, indicating that the company was able to convert its inventory into cash quickly and efficiently during those periods.

However, starting in September 2021, the cash conversion cycle turned positive, reaching a peak of 93.08 days by September 30, 2024. This increase suggests that Otter Tail Corporation took longer to turn its inventory into cash, which could be a result of various factors such as slower sales, inventory management issues, or changes in customer payment terms.

It is essential for the company to closely monitor and manage its cash conversion cycle to ensure optimal utilization of its resources and maintain healthy cash flows. A longer cash conversion cycle can tie up cash in working capital, potentially impacting liquidity and overall financial performance. Management may need to review and refine its inventory and accounts receivable management strategies to improve efficiency and shorten the cash conversion cycle in the future.