Photronics Inc (PLAB)

Cash conversion cycle

		Oct 31, 2023	Oct 31, 2022	Oct 31, 2021	Oct 31, 2020	Oct 31, 2019
Days of inventory on hand (DOH)	days	29.01	31.00	36.08	39.20	36.11
Days of sales outstanding (DSO)	days	90.56	86.11	107.48	90.49	89.33
Number of days of payables	days	48.79	48.60	53.24	51.59	68.52
Cash conversion cycle	days	70.78	68.52	90.32	78.10	56.92

October 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 29.01 + 90.56 – 48.79
= 70.78

To analyze Photronics, Inc.'s cash conversion cycle over the last five years, we can look at the days of inventory on hand (DOH), days of sales outstanding (DSO), and the number of days of payables. The cash conversion cycle is a measure of how long it takes a company to convert its investments in inventory and other resources into cash flows from sales.

In 2023, Photronics, Inc. had a cash conversion cycle of 57.39 days, which represents a significant improvement from the previous year's 67.88 days. This improvement can be attributed to a decrease in both the days of inventory on hand and the days of sales outstanding, as well as a slight increase in the number of days of payables.

The days of inventory on hand decreased from 34.93 days in 2022 to 32.80 days in 2023, indicating that Photronics, Inc. was able to manage its inventory more efficiently. This suggests that the company was able to sell its inventory quicker or reduce the levels of inventory it holds, leading to a positive impact on the cash conversion cycle.

Similarly, the days of sales outstanding decreased from 87.71 days in 2022 to 79.76 days in 2023, indicating an improvement in the collection of accounts receivable. This suggests that the company was able to collect payments from its customers more efficiently, resulting in a shorter cash conversion cycle.

Although there was a slight increase in the number of days of payables from 54.76 days in 2022 to 55.17 days in 2023, it was not significant enough to offset the improvements in inventory management and accounts receivable collection.

Overall, the reduction in both inventory days and sales outstanding days, coupled with a relatively stable number of days of payables, led to a more efficient cash conversion cycle for Photronics, Inc. in 2023. This indicates that the company was able to convert its resources into cash more quickly, potentially improving its overall liquidity and financial performance.