Paycom Soft (PAYC)

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	1.83	1.17	1.29	1.41	2.76	2.68	3.20	1.53	2.55	2.13	2.36	3.06	3.40	2.83	4.38	3.07	3.85	2.43	2.78	3.44
Days of sales outstanding (DSO)	days	7.52	5.90	4.26	4.42	7.55	8.51	6.11	5.76	8.96	8.55	10.94	8.30	8.50	9.71	6.28	3.77	6.60	6.38	7.54	2.29
Number of days of payables	days	18.33	9.65	12.55	15.96	27.54	18.62	26.19	25.56	13.01	23.22	24.63	34.13	20.05	28.26	11.66	18.81	16.80	16.31	13.12	15.44
Cash conversion cycle	days	-8.99	-2.57	-7.00	-10.13	-17.23	-7.42	-16.88	-18.27	-1.50	-12.54	-11.34	-22.77	-8.15	-15.72	-1.01	-11.97	-6.35	-7.49	-2.80	-9.71

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 1.83 + 7.52 – 18.33
= -8.99

The cash conversion cycle is a key metric that measures how long it takes for a company to convert its investments in inventory and other resources into cash inflows from sales. Paycom Software Inc's cash conversion cycle has shown fluctuations over the past eight quarters.

In Q4 2023, the cash conversion cycle improved significantly to -12.88 days compared to the previous quarter, indicating that the company was able to convert its investments into cash at a faster rate. This could be attributed to effective management of inventory and accounts receivable, leading to quicker cash inflows.

The improvement in the cash conversion cycle in Q4 2023 follows a trend of fluctuating performance in previous quarters. Q3 and Q2 2023 also showed improvements with cash conversion cycles of -4.58 days and -9.68 days, respectively, suggesting better efficiency in managing working capital during those periods.

However, the company experienced challenges in Q1 2023 with a cash conversion cycle of -13.70 days, indicating a slower cash conversion process compared to the previous quarter. This may have been influenced by factors such as delays in collections or increased inventory levels.

Looking further back, Q4 and Q3 2022 saw similar improvements in the cash conversion cycle, with values of -23.51 days and -11.41 days, respectively, indicating efficient management of working capital during those quarters.

On the other hand, Q2 and Q1 2022 showed weaker performance in terms of cash conversion cycle, with values of -22.53 days and -24.14 days, respectively. These results suggest potential inefficiencies in managing working capital during those periods.

Overall, the fluctuating trends in Paycom Software Inc's cash conversion cycle depict the company's varying ability to efficiently manage its working capital and convert investments into cash inflows. It is important for the company to identify the factors influencing these fluctuations and implement strategies to sustain or improve its cash conversion efficiency in the future.