Penguin Solutions, Inc. (PENG)

Cash conversion cycle

		Aug 31, 2024	Aug 31, 2023	Aug 31, 2022	Aug 31, 2021	Aug 31, 2020
Days of inventory on hand (DOH)	days	66.67	62.24	95.81	162.33	65.67
Days of sales outstanding (DSO)	days	78.48	55.52	92.83	108.37	70.22
Number of days of payables	days	80.08	48.02	106.49	191.81	90.51
Cash conversion cycle	days	65.07	69.75	82.15	78.89	45.37

August 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 66.67 + 78.48 – 80.08
= 65.07

The cash conversion cycle (CCC) of Penguin Solutions, Inc. has exhibited variability over the specified period from August 31, 2020, to August 31, 2024. Initially, on August 31, 2020, the CCC stood at 45.37 days, indicating a relatively efficient cycle in converting investments in inventory and receivables into cash.

Between August 31, 2020, and August 31, 2021, the CCC increased significantly to 78.89 days, reflecting a lengthening in the period necessary for converting inventory and receivables into cash. This expansion may be associated with changes in inventory management, receivables collection processes, or supplier payment terms, resulting in a longer operating cycle.

From August 31, 2021, to August 31, 2022, the CCC continued to rise modestly to 82.15 days, suggesting a further elongation of the cycle, potentially due to operational adjustments or external market factors influencing inventory levels or receivables turnover.

Subsequently, a noticeable reduction is observed: the CCC decreased to 69.75 days by August 31, 2023. This decline indicates improvements in operational efficiency, perhaps through better inventory control, faster receivables collection, or more favorable creditor payment terms. The decline suggests a strategic or operational shift towards more effective cash conversion.

The downward trend continued into the period ending August 31, 2024, with the CCC further reducing to 65.07 days. This improvement signifies ongoing efficiencies in managing working capital components and potentially reflects advancements in supply chain management, customer credit policies, or payment cycle practices.

Overall, the trend from 2020 to 2024 demonstrates an initial increase in the cash conversion cycle, followed by a gradual and sustained reduction. The recent shortening of the CCC suggests that Penguin Solutions, Inc. has taken steps to enhance its operational efficiencies, thereby reducing the time lag in converting inventories and receivables into cash, ultimately supporting improved liquidity and working capital management.