Waters Corporation (WAT)

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	161.61	168.54	175.87	223.89	156.39	151.51	142.27	129.58	126.17	143.66	131.40	102.81	119.94	134.78	143.66	141.28	133.66	155.68	148.41	140.31
Days of sales outstanding (DSO)	days	89.69	79.09	86.43	—	90.26	—	—	—	81.58	—	—	—	90.34	80.47	81.39	82.64	90.98	78.11	80.20	78.72
Number of days of payables	days	26.52	24.72	26.84	41.94	32.02	33.08	34.01	31.63	34.30	32.85	31.36	25.55	28.47	24.88	21.02	25.08	20.43	27.36	28.45	30.46
Cash conversion cycle	days	224.78	222.91	235.46	181.95	214.64	118.43	108.26	97.94	173.46	110.81	100.03	77.26	181.82	190.36	204.03	198.84	204.21	206.43	200.16	188.57

December 31, 2023 calculation

Cash conversion cycle = DOH + DSO – Number of days of payables
= 161.61 + 89.69 – 26.52
= 224.78

The cash conversion cycle of Waters Corp. has shown fluctuations over the last eight quarters. The company's cash conversion cycle ranged from 165.97 days to 218.47 days during this period, indicating variability in its efficiency in managing cash flows from operating activities.

In general, a shorter cash conversion cycle is preferred as it signifies that the company is able to convert its investments in inventory back into cash more quickly. Conversely, a longer cash conversion cycle can indicate inefficiencies in managing working capital, potentially leading to liquidity issues.

Between Q4 2022 and Q1 2023, Waters Corp. experienced an increase in its cash conversion cycle from 194.76 days to 202.90 days, indicating a slight deterioration in its working capital management efficiency. However, in Q2 and Q3 of 2023, there was a further increase in the cash conversion cycle to 218.41 days and 215.34 days, respectively, suggesting a prolonged period for the company to convert its investments in inventory and receivables back into cash.

Overall, Waters Corp. should focus on optimizing its cash conversion cycle by streamlining processes related to inventory management, accounts receivable, and payable, to enhance overall liquidity and operational efficiency.