Veracyte Inc (VCYT)

Cash conversion cycle

Dec 31, 2024 Dec 31, 2023 Dec 31, 2022 Dec 31, 2021 Dec 31, 2020
Days of inventory on hand (DOH) days 50.82 52.14 51.36 55.07 41.00
Days of sales outstanding (DSO) days 38.10 40.82 54.18 68.94 57.36
Number of days of payables days 20.17 41.84 42.80 60.64 27.44
Cash conversion cycle days 68.74 51.12 62.75 63.37 70.92

December 31, 2024 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 50.82 + 38.10 – 20.17
= 68.74

The cash conversion cycle (CCC) of Veracyte Inc has exhibited notable fluctuations over the specified period, indicating shifts in the company's operational efficiency in managing its working capital.

At the end of December 2020, the CCC was approximately 70.92 days, representing the number of days it took for the company to convert its investments in inventory and receivables into cash, net of the period it delays its payments to suppliers. There was an improvement in this metric in subsequent years, with the cycle decreasing to 63.37 days at the end of December 2021 and further to 62.75 days by December 2022. This trend suggests an enhanced efficiency in managing receivables collection and inventory turnover, as well as possible improvements in payment terms with suppliers.

However, this positive trend did not sustain into 2023, with the CCC declining further to 51.12 days. The reduction indicates a significant decrease in the time it takes for Veracyte Inc to convert its operational investments into cash, which could be attributed to faster receivables collection, improved inventory management, or extended payment periods to suppliers.

Contrarily, in 2024, the CCC increased to approximately 68.74 days, exceeding the levels observed in 2020 and 2021. This rise suggests a reversal in operational efficiency, potentially driven by longer receivables collection periods, slower inventory turnover, or shortened payment cycles with suppliers. The increase may imply that the company's effectiveness in converting investments into cash has diminished, which could impact liquidity and working capital management.

Overall, the company's cash conversion cycle has experienced both improvements and setbacks over the analyzed period, highlighting dynamic changes in operational efficiency and working capital strategies. The variability in CCC underscores the importance of ongoing management efforts to optimize the cycle and maintain favorable liquidity positions.