Gentherm Inc (THRM)

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	56.44	71.44	65.06	56.06	49.03
Days of sales outstanding (DSO)	days	63.94	77.30	68.53	93.36	63.92
Number of days of payables	days	59.16	59.65	50.07	53.15	34.36
Cash conversion cycle	days	61.21	89.10	83.52	96.28	78.59

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 56.44 + 63.94 – 59.16
= 61.21

Gentherm Inc's cash conversion cycle has shown fluctuation over the past five years. As of December 31, 2023, the company's cash conversion cycle stood at 69.36 days, indicating an improvement compared to the previous year. This signifies that Gentherm is managing its cash effectively and efficiently, requiring fewer days to convert its investments in inventory and accounts receivable into cash.

In the preceding years, Gentherm's cash conversion cycle has shown some variability. The cycle was highest in 2020 at 100.09 days, which suggests a longer time taken by the company to convert its resources into cash. Subsequently, there was a notable decrease in the cash conversion cycle in 2021 to 90.18 days, followed by further improvement in 2022 and 2023.

A decreasing trend in the cash conversion cycle implies that Gentherm has been able to streamline its operations, enhance inventory management, and accelerate receivables collection, ultimately leading to a more efficient cash conversion process. However, it is essential for the company to sustain this positive trend and continuously seek ways to optimize its working capital management for long-term financial health.