Planet Fitness Inc (PLNT)
Cash conversion cycle
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Days of inventory on hand (DOH) | days | 8.98 | 10.85 | 1.63 | 0.89 | 1.65 |
| Days of sales outstanding (DSO) | days | 20.86 | 28.51 | 31.79 | 43.22 | 30.20 |
| Number of days of payables | days | 45.69 | 42.39 | 39.41 | 36.60 | 39.92 |
| Cash conversion cycle | days | -15.85 | -3.03 | -5.99 | 7.51 | -8.07 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= 8.98 + 20.86 – 45.69
= -15.85
The cash conversion cycle of Planet Fitness Inc has fluctuated over the past five years. In 2023, the company reported a negative cash conversion cycle of -17.54 days, indicating that it takes less time for the company to convert its investments in inventory and other resources into cash received from customers and then back into cash spent on inventory replenishment.
This improvement in efficiency compared to the previous year, where the cash conversion cycle was -5.56 days, suggests that Planet Fitness has optimized its working capital management processes.
In 2021, the cash conversion cycle was significantly lower at -68.99 days, indicating a longer cycle time and potential inefficiencies in managing inventory, accounts receivable, and accounts payable. The company further improved in 2020 with a cash conversion cycle of -62.60 days, indicating some progress in streamlining its operational and financial processes.
The best performance in this regard was observed in 2019 when the cash conversion cycle was -10.49 days, implying a relatively efficient operation in converting inputs into cash flows.
Overall, the trend suggests that Planet Fitness Inc has made efforts to shorten its cash conversion cycle over the years, with varying success. A negative cash conversion cycle indicates that the company is effectively managing its working capital, but periodic fluctuations may reflect changing business conditions and operational challenges.