SPS Commerce Inc (SPSC)

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	—	124.46	122.46	122.34	125.80	124.22	123.36	124.36	123.43	123.46	128.92	132.81	137.11	137.83	137.48	137.40	139.58	141.03	147.79	151.91
Days of sales outstanding (DSO)	days	31.84	32.06	33.32	33.62	31.92	31.11	35.27	35.35	32.74	35.25	39.85	39.19	39.20	36.60	42.51	38.66	41.23	39.49	42.59	40.34
Number of days of payables	days	14.88	12.95	13.42	12.13	26.84	20.34	11.35	12.60	23.09	11.14	19.08	17.45	19.57	18.98	16.34	17.79	16.91	17.81	15.62	19.23
Cash conversion cycle	days	16.97	143.56	142.37	143.83	130.88	134.99	147.28	147.11	133.08	147.58	149.69	154.55	156.74	155.45	163.64	158.28	163.90	162.71	174.76	173.02

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 31.84 – 14.88
= 16.97

The cash conversion cycle of SPS Commerce Inc. has displayed some fluctuations over the past eight quarters. In Q1 2022, the company had a relatively short cash conversion cycle of 5.08 days, showcasing efficient management of cash flow and working capital. However, this cycle increased in subsequent quarters, reaching its peak at 23.93 days in Q2 2022 and 22.76 days in Q1 2022.

Following this peak, SPS Commerce Inc. managed to reduce its cash conversion cycle significantly in Q4 2022 to 16.97 days, indicating improvements in managing its accounts receivable, inventory, and accounts payable. However, this improvement was not sustained consistently, as the cycle increased again in the following quarters, hitting 19.10 days in Q3 2023 and 19.91 days in Q2 2023.

Overall, the trend of the cash conversion cycle for SPS Commerce Inc. shows some variability, reflecting the company's effectiveness in managing its working capital and cash flow over the analyzed quarters. It is essential for the company to focus on optimizing its cash conversion cycle to ensure efficient utilization of resources and sustained financial health in the long term.