Otter Tail Corporation (OTTR)

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	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	6,034.06	2,487.12	2,684.19	2,840.69
Days of sales outstanding (DSO)	days	43.06	52.94	52.48	45.22	36.27	47.76	58.29	61.45	53.88	61.00	60.46	55.09	48.43	51.14	45.91	49.20	44.21	47.39	52.82	55.83
Number of days of payables	days	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	7,447.69	2,290.00	2,836.02	2,674.71
Cash conversion cycle	days	81.97	84.75	83.39	82.43	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	-1,369.42	244.51	-99.01	221.80

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 105.39 + 43.06 – 66.48
= 81.97

The cash conversion cycle of Otter Tail Corporation has shown fluctuation over the past eight quarters. In Q4 2023, the company's cash conversion cycle was 76.55 days, slightly higher compared to the previous quarter at 76.39 days. Despite the slight increase, the cycle has remained relatively stable around the 75-day mark for the past four quarters.

The cash conversion cycle measures the time it takes for a company to convert its investments in inventory and other resources into cash flows from sales. A longer cash conversion cycle indicates that the company takes a longer time to recover its investment in inventory, which could potentially strain its liquidity and working capital management.

Otter Tail Corporation's cash conversion cycle peaked at 75.02 days in Q1 2022, indicating a delayed conversion of inventory and receivables into cash. However, the company has shown improvement since then, with the cycle dropping to 57.50 days in Q4 2022. This improvement suggests a more efficient management of inventory and receivables, leading to quicker cash flows from sales.

Overall, while there have been fluctuations in Otter Tail Corporation's cash conversion cycle, the recent stability around the 75-day mark indicates a consistent performance in managing its working capital and liquidity. Maintaining an optimal balance in the cash conversion cycle is crucial for the company to ensure efficient operations and sustainable cash flows in the long run.