SolarWinds Corp (SWI)
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 | — | — | — | — | — |
| Days of sales outstanding (DSO) | days | 49.99 | 51.34 | 48.87 | 59.36 | 67.12 |
| Number of days of payables | days | 40.70 | 53.41 | 11.78 | 21.39 | 25.41 |
| Cash conversion cycle | days | 9.29 | -2.07 | 37.08 | 37.97 | 41.71 |
December 31, 2023 calculation
Cash conversion cycle = DOH + DSO – Number of days of payables
= — + 49.99 – 40.70
= 9.29
The cash conversion cycle is a key metric that measures how long a company takes to convert its investments in inventory and other resources into cash flows from sales.
SolarWinds Corp's cash conversion cycle has shown significant fluctuation over the past five years. In 2019 and 2020, the company had relatively long cash conversion cycles of 41.71 days and 37.97 days, respectively. This indicates that SolarWinds took a considerable amount of time to convert its investments into cash.
However, in 2021, there was a notable improvement as the cash conversion cycle decreased to 37.08 days. This suggests that the company was more efficient in managing its working capital and converting its resources into cash during that year.
The trend continued in 2022, with the cash conversion cycle improving to -2.07 days. A negative cash conversion cycle may indicate that SolarWinds was able to collect cash from its sales before paying its suppliers and other obligations. This could be due to efficient cash management practices or changes in the company's sales and payment terms.
In 2023, the cash conversion cycle increased slightly to 9.29 days. While this is still a relatively short cycle compared to previous years, it suggests that SolarWinds took a bit longer to convert its investments into cash during that period.
Overall, SolarWinds Corp's cash conversion cycle has been volatile, with significant improvements in recent years. It is essential for the company to continue monitoring and optimizing its working capital management to ensure efficient cash flows and sustainable operations.
Peer comparison
Dec 31, 2023