Celgene Corp. (NASDAQ:CELG)

The analyzed financial ratios and periods reflect various operational efficiency trends over multiple quarters from 2014 to 2019.

Inventory Turnover

Inventory turnover started below 1.0 in early 2015, indicating slow turnover. It gradually declined to a low near 0.84 by late 2017 but then showed a steady improvement from 2018 onward, rising to 1.39 by the third quarter of 2019, signaling increasing efficiency in inventory management.

Receivables Turnover

The receivables turnover ratio remained relatively stable throughout the period, fluctuating between approximately 6.4 and 7.4. There was a slight upward trend towards 2019, indicating improved efficiency in collecting receivables.

Payables Turnover

Payables turnover demonstrated variability with occasional declines and recoveries. After a peak near 2.2 in late 2014, it decreased overall, reaching lows around 1.4 to 1.5 in 2018 and 2019, suggesting slower payment cycles during these periods.

Working Capital Turnover

Working capital turnover experienced moderate growth from 1.0 in early 2014 to peaks above 1.5 throughout 2015 and 2016. Notably, in early 2018, there was a sharp spike up to 6.0 then a quick decline in subsequent quarters. This spike may indicate an exceptional event or accounting adjustment impacting working capital efficiency temporarily before stabilizing near 1.8 by late 2019.

Average Inventory Processing Period

This period generally increased from roughly 370 days in 2014 to a peak exceeding 430 days in 2016 and 2017, reflecting inventory holding lengthening. However, starting in 2018, there was a notable reduction down to approximately 263 days by late 2019, consistent with the improved inventory turnover noted.

Average Receivable Collection Period

The receivable collection period remained relatively steady near 50-57 days across the analyzed timeframe, suggesting consistent credit and collection policies.

Operating Cycle

The operating cycle mirrored inventory and receivables trends, expanding from around 420 days in 2014-2015 up to nearly 490 days in 2016-2017. From 2018 onward, it declined significantly to about 314 days by late 2019, improving overall operating efficiency.

Average Payables Payment Period

The payment period fluctuated noticeably, increasing from about 165 days in late 2014 to peaks above 240 days in 2017 and early 2018, indicating longer payment terms or delays. It trended lower overall afterwards but remained volatile through 2019.

Cash Conversion Cycle

The cash conversion cycle followed a decreasing trend from highs around 285 days in 2016-2017 to very low levels below 75 days in early 2019, before moderate fluctuations thereafter. This substantial reduction reflects improved liquidity management and faster conversion of investments in inventory and receivables into cash.

Overall, the data reveals that operational efficiency, particularly in inventory management and cash conversion, declined until around 2017 but subsequently improved markedly through 2019. Payment practices became more varied with extended payment periods impacting the cash cycle dynamics. The consistent receivables collection timing suggests stable credit management despite these fluctuations.

Cost of Goods Sold, Excluding Amortization of Acquired Intangible Assets

The cost of goods sold (COGS) demonstrates a generally increasing trend over the analyzed periods. Starting at 86 million USD in March 2014, it rises almost consistently, reaching a peak of 169 million USD in March 2019. There are slight fluctuations observed, such as minor decreases or plateaus in some quarters, but the overall trajectory indicates a steady growth in COGS over the five-year horizon.

Inventory

Inventory levels also show a gradual increase from 348 million USD in March 2014 to a high of 555 million USD in March 2018. Following this peak, inventory levels experience a decline, dropping to 442 million USD by June 2019, before slightly rebounding towards 451 million USD in September 2019. The inventory buildup through most of the period suggests expansion in stock holdings, while the decrease near the end may reflect improved inventory management or adjustments in demand.

Inventory Turnover Ratio

The inventory turnover ratio starts with missing data but becomes available from September 2014 onward. Initially, the ratio remains below 1, indicating slow movement of inventory relative to sales, with a declining trend from 0.98 down to about 0.84 in September 2017. After this low point, the turnover ratio stabilizes around 0.85 for several quarters and then shows improvement, rising above 1.0 from March 2018 and reaching approximately 1.39 by September 2019. This upward trend in turnover ratio implies increasingly efficient inventory management in the later periods, with faster conversion of inventory into sales despite the prior accumulation in stock.

Overall Insights

The combined trends suggest that as COGS steadily increased, inventory levels initially rose, likely to support sales growth, but were subsequently optimized leading to a reduction. The improvement in inventory turnover ratio towards the end of the period supports the notion of enhanced operational efficiency. This indicates a shift from inventory accumulation to better stock utilization and faster sales conversion in the recent quarters.

The analysis of the quarterly financial data reveals several noteworthy trends in net product sales, accounts receivable, and receivables turnover over the observed periods.

Net Product Sales

Net product sales demonstrate a consistent upward trajectory throughout the quarters, starting at 1,708 million US dollars in March 2014 and reaching 4,518 million US dollars by September 2019. This reflects a steady growth rate with occasional periods of acceleration, particularly noticeable in the latter years. The increase indicates strengthening market demand or enhanced sales performance over the nearly six-year span.

Accounts Receivable, Net of Allowances

Accounts receivable, net of allowances, also exhibit a general rising trend, increasing from 1,073 million US dollars in March 2014 to 2,374 million US dollars by September 2019. This growth aligns with the expansion in net product sales, suggesting that the company's credit sales have increased correspondingly. There are some fluctuations seen quarter to quarter, but the overall pattern is one of growth, indicating a potential increase in credit exposure or lengthening of payment cycles.

Receivables Turnover Ratio

The receivables turnover ratio, available from June 2014 onward, remains relatively stable with minor fluctuations between 6.45 and 7.39 times. The ratio peaked around March 2019 at 7.39 before experiencing a slight decline and subsequent increase again by September 2019 to 7.15. This stability suggests that despite the rising accounts receivable and sales, the company has maintained effective credit and collections management to keep the receivables turning over at a consistent rate.

Overall, the data indicate robust sales growth supported by an expanding receivable base. However, the steady receivables turnover ratio implies that the company has effectively managed its collections despite the growth in receivables. Monitoring these trends is essential to ensure that increases in sales and receivables do not adversely affect cash flow or credit risk.

The cost of goods sold, excluding amortization of acquired intangible assets, demonstrates a generally upward trend over the presented periods. Starting at 86 million US dollars in March 2014, it increased progressively with occasional fluctuations, reaching a peak of 169 million in March 2019 before dipping slightly and ending at 167 million in September 2019. This pattern indicates an overall increase in production or inventory costs over the five-year span.

Accounts payable also shows a rising trend throughout the periods, beginning at 149 million US dollars in March 2014 and rising with some variability, reaching the highest observed value of 421 million by September 2019. Notable spikes occurred around December 2015 and June 2019, suggesting periods of increased short-term obligations or credit procurement from suppliers.

The payables turnover ratio, which reflects how quickly the company pays off its suppliers, exhibits more variability without a clear persistent directional trend. Early ratios recorded for 2014 and 2015 range close to 2, indicating relatively rapid turnover of payables. However, from 2016 onward, the ratio fluctuates between approximately 1.4 and 1.9, with some downward trends around early and late 2018, reaching lows near 1.4 to 1.5. This suggests a slower payment cycle during these periods, potentially indicating management’s evolving terms with suppliers or strategic cash management changes.

Overall, the data reveals that the company experienced increasing costs of goods sold and accounts payable balances, coupled with moderately fluctuating payables turnover ratios. The rising payables alongside higher cost of goods sold could suggest expanding operational scale, while the variability in payables turnover ratio points to changing payment practices or credit terms over time.

The working capital of the company demonstrated notable fluctuations over the analyzed periods. Initially, from March 2014 through December 2017, working capital generally increased, rising from 4517 million US dollars to a peak of 11905 million US dollars. This upward trend signifies an expansion in current assets relative to current liabilities during this timeframe. However, starting in March 2018, a sharp decline is observed, with working capital dropping to 2351 million US dollars by June 2018. Subsequent quarters show partial recovery, bringing working capital back up to 9445 million US dollars by September 2019, though it does not reach the earlier peak level.

Net product sales steadily increased across the entire period. Starting at 1708 million US dollars in March 2014, net product sales rose consistently each quarter, reaching 4518 million US dollars by September 2019. Noteworthy is the more accelerated growth phase observed from late 2017 through 2019, indicating enhanced revenue generation from core products during this period.

Working capital turnover ratios, which measure the efficiency of working capital utilization in generating sales, present a different pattern. The ratio was not available in the initial quarters but starts from March 2015 at a value of 1.0 and generally increases until March 2017, peaking around 1.55, suggesting improving efficiency in the use of working capital to support sales. After this peak, the ratio declines gradually until December 2017, indicating a temporary dip in efficiency.

Significant volatility in the working capital turnover ratio occurs during 2018, with an abrupt increase to 2.85 in March 2018 and an even sharper peak of 6.0 in June 2018. This spike coincides with the sharp decrease in working capital during the same period, which largely explains the elevated turnover ratio as sales stayed relatively stable. Following this, the ratio declines again through 2019, settling around 1.8 by September 2019, which, while lower than the peak, still represents improved efficiency compared to the initial years.

In summary, the data indicates that while net product sales showed consistent and substantial growth, working capital exhibited periods of both accumulation and reduction. The sharp contraction in working capital in early 2018 and subsequent volatility in working capital turnover suggest that the company made significant adjustments to its current asset and liability management during this time, potentially aiming to optimize capital usage. The overall long-term trend points toward improved operational efficiency as sales increased more robustly relative to working capital after mid-2018.

Inventory Turnover Ratio

The inventory turnover ratio shows a generally stable but slightly fluctuating pattern over the analyzed periods. Starting at 0.98 in March 2015, it experiences minor increases and decreases, reaching a value as low as 0.84 in September 2017. From late 2017 onward, the ratio gradually improves, culminating in a peak of 1.39 by September 2019. This upward trend in recent quarters indicates a more efficient use of inventory during the last year of the data set.

Average Inventory Processing Period (Number of Days)

The average inventory processing period does not follow a consistent linear trend but displays a general oscillation combined with an overall decreasing tendency toward the latter part of the period. Initially, the processing period is relatively high, around 372 days in March 2015, and further increases to a peak of 437 days in September 2017. Following this peak, there is a marked decline in the processing period, dropping to 263 days by September 2019. This reduction in processing days corresponds well with the observed increase in inventory turnover ratio, implying improved inventory management and faster inventory conversion to sales or use.

Relationship Between Metrics

The inverse relationship between inventory turnover ratio and average inventory processing period is evident. When the average processing period lengthens, the inventory turnover ratio tends to decrease, indicating slower inventory movement. Conversely, as the processing period shortens after 2017, the turnover ratio correspondingly rises, highlighting enhanced operational efficiency and potential improvements in supply chain or inventory control practices over the most recent periods.

Receivables Turnover

The receivables turnover ratio exhibits a generally stable pattern with a slight upward trend over the observed periods. Starting from a ratio of approximately 6.48 in March 2014, it fluctuates modestly but remains within a narrow range, peaking at 7.39 in March 2019. This gradual increase indicates a mild improvement in the company's efficiency in collecting receivables over time.

Average Receivable Collection Period

The average receivable collection period shows relative consistency, mostly oscillating between 53 and 57 days in earlier periods and demonstrating a slight decrease in more recent quarters. Specifically, the period decreases from 56 days in March 2014 to around 51-55 days in 2019, with a low point of 49 days recorded in March 2019. This reduction suggests a slight improvement in the speed of accounts receivable collections.

Overall Trends and Insights

The data indicates a modest but consistent enhancement in receivables management efficiency. The increase in receivables turnover coupled with a corresponding decrease in the collection period reflects a positive development in cash flow management. Although fluctuations occur, the trends suggest that the company is progressively improving its ability to convert receivables into cash in a timely manner.

The data reveals notable trends in the company's working capital management indicators over multiple quarters from 2014 to 2019.

Average Inventory Processing Period

This metric, starting from the first available data in March 2015, shows an overall upward trend until late 2016, peaking around 431 days in December 2016. Subsequently, it continues to hover at relatively high levels around the 400-day mark through 2017 and early 2018, reaching a maximum of 437 days in September 2017. A significant decline begins in 2018, reaching the lowest values in the examined timeline during 2019, dropping progressively from 405 days in the first quarter to 263 days by the third quarter of 2019. This declining trend in inventory days towards the end suggests improved inventory turnover or management efficiency.

Average Receivable Collection Period

The receivable collection period remains relatively stable across the observed quarters, fluctuating narrowly between 49 and 57 days. There is no significant long-term upward or downward trend, though slight reductions are evident in some periods, such as a drop to 49 days in the first quarter of 2019 from higher values around 54-57 days in earlier years. Overall, the company appears to maintain consistent efficiency in collecting receivables.

Operating Cycle

The operating cycle, which sums inventory and receivables periods, follows a similar pattern to the inventory processing period. It initially increases from around 428 days in March 2015 to a peak of nearly 485 days in December 2016. After maintaining elevated levels through 2017 and early 2018, it declines markedly throughout 2018 and 2019, descending from approximately 460 days in early 2018 to about 314 days by the third quarter of 2019. This reduction indicates an overall acceleration in the company's cash conversion process, predominantly driven by improvements in inventory management.

Payables Turnover

The payables turnover ratio displays fluctuations across the periods analyzed. Starting from a level around 1.95–2.21 in 2015, the ratio exhibits a general declining trend through to 2019, with intermittent increases. Notably, after peaking at 2.21 in December 2015, the ratio decreases steadily, reaching its lowest points near 1.4 in March 2019, followed by a slight recovery towards the end of 2019. This pattern suggests an overall slowing in the rate at which payables are being settled relative to the credit purchases over time.

Average Payables Payment Period

The average payables payment period, measured in days, shows a generally increasing trend throughout the observed quarters. Beginning near 165–187 days in early to late 2015, the period extends significantly over the years, peaking at over 260 days in March 2019. This indicates that the company has been taking longer to settle its payables over the analyzed timeframe. There are some oscillations; however, the dominant pattern is an elongation of the payment cycle.

Correlation Between Metrics

The inverse relationship between payables turnover and average payment period is evident. As the payment period lengthens, the turnover ratio diminishes, consistent with expected behavior since a longer payment period implies slower payments and thus fewer turnovers within the same period. This dynamic reflects a strategic or operational choice to extend payment durations or possibly changes in supplier terms or cash management practices.

Insights

The data suggests a trend toward slower payment to suppliers over the period analyzed. The increase in average payment days alongside the decrease in turnover ratio could impact supplier relationships and credit terms. The company might be managing cash flow by extending payables, which may provide short-term liquidity benefits but could also raise concerns about financial flexibility or supplier dependence in the longer term.

Average Inventory Processing Period

The inventory processing period exhibited a general upward trend from March 2015 through the end of 2017, increasing from 372 days to a peak of 437 days by September 2017. Following this peak, a gradual decline occurred throughout 2018 and into mid-2019, with the period dropping to 263 days by September 2019. This pattern suggests an initial lengthening in inventory holding times, potentially indicating slower inventory turnover or increased stock levels, followed by improvements in inventory management in later periods.

Average Receivable Collection Period

The receivable collection period remained relatively stable across the analyzed quarters, fluctuating slightly between a low of 49 days and a high of 57 days. This stability indicates consistency in the credit and collection policies over the time frame, with no significant deviations in the speed of customer payments.

Average Payables Payment Period

The payables payment period showed variability with an initial decrease from 187 days in March 2015 to 165 days by December 2015, followed by an upward trend reaching a maximum of 260 days in June 2019. This reflects an increasing tendency to extend payment terms to suppliers over time, which could enhance short-term liquidity but might affect supplier relationships or credit terms in the long run.

Cash Conversion Cycle

The cash conversion cycle fluctuated moderately between 220 and 285 days from March 2015 to December 2017, indicating a relatively stable but prolonged cash flow conversion period. In 2018 and 2019, a marked improvement is observed, with the cycle dropping sharply from 245 days in March 2018 down to a low of 69 days by September 2019. This significant reduction suggests enhanced operational efficiency and better working capital management, largely driven by shorter inventory and receivables periods combined with an extended payables period.