Hackett Research: Largest U.S. Companies Improve Working Capital Performance in 2021 as Revenue, Profit Margins, And More Bounce Back to Pre-Pandemic Levels
July 28 2022 - 10:00AM
Business Wire
Despite Performance Gains in Payables,
Receivables, and Inventory, Improvement Opportunity Grew by
28%, to $1.7 Trillion
For the first time in a decade, the 1000 largest public
companies in the U.S. improved performance of all three major
working capital components last year – they managed inventory more
effectively, collected from customers faster, and took longer to
pay suppliers, according to the 2022 Working Capital Survey from
The Hackett Group, Inc. (NASDAQ:
HCKT). But despite this triple improvement, the overall working
capital improvement opportunity increased substantially.
The Hackett Group®’s 2022 Working Capital Survey is currently
featured on CFO.com. A summary of the research findings, including
detailed industry analysis and working capital improvement
recommendations, is available on a complimentary basis, with
registration, at this link:
http://go.poweredbyhackett.com/wcs22sm.
After a tumultuous year in 2020, which saw major operational and
financial disruptions across most industries, performance and
liquidity did more than just move back to pre-pandemic levels in
2021. The three key measures of working capital – days payables
outstanding (DPO), days sales outstanding (DSO), and days inventory
outstanding (DIO) – all trended positively for the year. DPO
improved by .5%, from 61.9 days to 62.2 days. DSO improved by 2%,
from 41.7 days to 40.6 days. Finally, DIO improved by 2%, from 56.7
days to 55.7 days.
Spurred by a 22% increase in revenues as companies bounced back
from the early stages of the pandemic, companies also saw a 12%
improvement in EBITDA margins, a dramatic increase following a 4%
drop in 2020. “Companies managed to remain profitable despite raw
material and labor pressure, accelerating their digital
transformation to improve productivity, and reconfiguring their
offerings to maintain profitability,” said The Hackett Group
Director István Bodó.
Excess working capital grew substantially in 2021, far outpacing
the revenue increase. According to The Hackett Group’s analysis,
the top 1,000 companies have nearly $1.7 trillion tied up in excess
working capital. That’s up 28% from $1.29 trillion in 2020. The
opportunity includes $627 billion in inventory, $533 billion in
receivables, and $498 billion in payables.
Top performers by industry now convert cash more than 3x faster
than typical companies (15.8 days versus 46.2 days). They collect
from customers 43% faster (in 27.8 days versus 48.7 days), hold 58%
less inventory (28.1 days versus 67.7 days) and take 50% longer to
pay suppliers (76.6 days versus 51.2 days)
Cash on hand as a percentage of revenue fell by 23% last year,
after a sharp increase to 13% in 2020, putting it now back near
pre-pandemic levels. Companies also saw a 17% decrease in debt as a
percentage of revenue, indicating that companies have been using
the cash they have hoarded during the pandemic to enhance their
operational and financial performance.
“The improved metrics of 2021 are encouraging, but they are
contrasted by a significant increase in total excess working
capital,” said The Hackett Group Director Shawn Townsend. “That
opportunity -- combined with ongoing uncertainties and disruptions
ranging from high inflation, growing interest rates, geopolitical
issues and the ongoing pandemic -- means that companies cannot take
their foot off the gas when it comes to working capital management.
Prudent companies will not just fine-tune their inventory,
receivables, and payables strategies. They will also double down on
capabilities for managing working capital health – increasing their
visibility into key indicators, sharing information better across
functions, and automating processes – to enable agility amid
continuing change.”
About The Hackett Group
The Hackett Group, Inc. (NASDAQ: HCKT) is an intellectual
property-based strategic consultancy and leading enterprise
benchmarking firm to global companies, offering digital
transformation, including implementation of leading enterprise
cloud applications, workflow automation and analytics that enable
Digital World Class™ performance.
Drawing from our unparalleled IP from nearly 20,000 benchmark
studies with the world’s leading businesses – including 97% of the
Dow Jones Industrials, 94% of the Fortune 100, 70% of the DAX 30
and 51% of the FTSE 100 – captured through our leading benchmarking
platform, Quantum Leap® and our Digital Transformation Platform
(DTP), we accelerate best-practice implementations.
More information on The Hackett Group is available at:
www.thehackettgroup.com, info@thehackettgroup.com, or by calling
(770) 225-3600.
The Hackett Group, quadrant logo, World Class Defined and
Enabled, and Quantum Leap are the registered marks of The Hackett
Group.
Cautionary Statement Regarding “Forward-Looking”
Statements
This release contains “forward-looking” statements within the
meaning of Section 27A of the Securities Act of 1933 as amended and
Section 21E of the Securities Exchange Act of 1934, as amended.
Statements including without limitation, words such as “expects,”
“anticipates,” “intends,” “plans,” “believes,” seeks,” “estimates,”
or other similar phrases or variations of such words or similar
expressions indicating, present or future anticipated or expected
occurrences or outcomes are intended to identify such
forward-looking statements. Forward-looking statements are not
statements of historical fact and involve known and unknown risks,
uncertainties and other factors that may cause the Company’s actual
results, performance or achievements to be materially different
from the results, performance or achievements expressed or implied
by the forward-looking statements. Factors that may impact such
forward-looking statements include without limitation, the ability
of The Hackett Group to effectively market its digital
transformation and other consulting services, competition from
other consulting and technology companies that may have or develop
in the future, similar offerings, the commercial viability of The
Hackett Group and its services as well as other risk detailed in
The Hackett Group’s reports filed with the United States Securities
and Exchange Commission. The Hackett Group does not undertake any
duty to update this release or any forward-looking statements
contained herein.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220728005142/en/
Gary Baker, Global Communications Director - (917) 796-2391 or
gbaker@thehackettgroup.com
Hackett (NASDAQ:HCKT)
Historical Stock Chart
From Aug 2024 to Sep 2024
Hackett (NASDAQ:HCKT)
Historical Stock Chart
From Sep 2023 to Sep 2024