Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
Revenue, operating cash flow, and free cash flow all improved compared to both the prior quarter and the same quarter last year. Free cash flow margin strengthened and remained above the levels of both comparison periods.
- Free cash flow was nearly equivalent to operating cash flow due to very low capital expenditure, resulting in a high free cash flow margin relative to revenue.
- Revenue, operating cash flow, and free cash flow were all higher versus the immediately preceding quarter and the same quarter one year earlier. Free cash flow margin was stronger in both comparisons.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
$4.2B
Trailing twelve-month free cash flow.
Quarter free cash flow
$1.3B
Free cash flow in the selected fiscal quarter.
Operating cash flow
$1.3B
Cash generated by operations before capital spending.
CapEx
$15.0M
Capital spending and related asset purchases.
FCF margin
38.6%
The share of revenue converted into free cash flow.
FCF reconciliation
Free cash flow is not a GAAP line item; it should be bridged from the cash flow statement.
| Operating cash flow | $1.3B | Cash generated by operations before capital spending. |
| Capital expenditures | $15.0M | Capital spending used to bridge CFO to FCF. |
| Free cash flow | $1.3B | Operating cash flow less capital spending. |
Cash flow trend
A short quarterly history shows whether FCF is scaling with revenue or only spiking for one period.
| Period | Revenue | Operating CF | CapEx | FCF | FCF margin |
|---|---|---|---|---|---|
| 2022-06-30 | $2.1B | $801.0M | $5.0M | $796.0M | 37.8% |
| 2022-09-30 | $2.9B | $964.0M | $6.0M | $958.0M | 33.2% |
| 2022-12-31 | $1.9B | $463.0M | $8.0M | $455.0M | 23.9% |
| 2023-03-31 | $1.8B | $1.6B | $6.0M | $1.6B | 87.0% |
| 2023-06-30 | $2.5B | $909.0M | $9.0M | $900.0M | 36.2% |
| 2023-09-30 | $3.4B | $1.3B | $15.0M | $1.3B | 38.6% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | 29.9% | Shows whether accounting earnings convert into cash. |
| CapEx / revenue | 0.4% | Lower capital intensity usually supports FCF margin. |
| Net cash | n/a | Cash and equivalents minus total debt. |
Recent events shaping cash flow
Near-term business events that help explain the free cash flow result.
Revenue Growth Driving Cash Flow
Revenue rose in the current quarter compared to both the prior quarter and the same quarter last year, and operating cash flow increased in tandem. This combination was the most observable factor supporting the improvement in free cash flow and margin.
Higher revenue and operating cash flow led to stronger free cash flow and an improved margin.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
Free cash flow was nearly equivalent to operating cash flow due to very low capital expenditure, resulting in a high free cash flow margin relative to revenue.
Revenue, operating cash flow, and free cash flow were all higher versus the immediately preceding quarter and the same quarter one year earlier. Free cash flow margin was stronger in both comparisons.
Monitor whether the consistently low level of capital expenditure persists in future quarters.
Risks and tripwires
Observable signals that would weaken the free cash flow thesis.
| Risk | Tripwire | Why it matters |
|---|---|---|
| FCF margin compression | FCF margin falls for two consecutive quarters. | Cash conversion may be weakening before earnings show it. |
| Capital intensity rises | CapEx/revenue moves materially above the recent run rate. | More operating cash flow would be consumed before becoming FCF. |
| Working capital drag | Inventory or receivables grow faster than revenue. | Reported growth may not translate into cash. |