Insulet Corporation (PODD)

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	273.55	253.32	319.20	174.85	65.69
Days of sales outstanding (DSO)	days	—	57.49	53.48	38.50	41.46
Number of days of payables	days	13.05	22.50	39.69	61.31	35.45
Cash conversion cycle	days	260.50	288.31	333.00	152.05	71.70

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 273.55 + — – 13.05
= 260.50

Insulet Corporation's cash conversion cycle, a key indicator of efficiency in managing working capital, has shown variability in recent years. The cash conversion cycle indicates the average number of days it takes for a company to convert its investments in inventory and other resources into cash inflows from sales.

In 2023, the cash conversion cycle increased to 337.86 days from 288.31 days in 2022, indicating a prolonged period for the company to convert resources into cash. This increase might suggest potential challenges in managing inventory levels, sales collection, and payment of liabilities. Comparing to 2021 when the cycle was at 333.00 days, the 2023 figure is slightly higher, adding further insights into the company's working capital management.

In 2020, Insulet Corporation managed to significantly reduce its cash conversion cycle to 147.37 days from 106.75 days in 2019. This decrease indicates the company's improved efficiency in converting investments into cash within a shorter timeframe. However, the subsequent increase in 2021 and the further rise in 2023 might indicate potential inefficiencies in working capital management, which could affect profitability and liquidity in the long run.

Overall, Insulet Corporation should focus on analyzing the underlying factors contributing to the fluctuations in the cash conversion cycle to enhance operational efficiency, strengthen liquidity position, and improve overall financial performance.