Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
Arch Capital Group's free cash flow for the quarter ended December 31, 2023 was lower than the previous quarter but higher than the same quarter a year earlier. The free cash flow margin weakened sequentially while improving year-on-year.
- Revenue increased compared to the prior quarter, but operating cash flow decreased, leading to a lower free cash flow margin. Capital expenditure was slightly higher, contributing to the sequential decline in free cash flow.
- Compared to the prior quarter, revenue was higher, while operating cash flow and free cash flow were lower, and the margin weakened. Compared to the same quarter a year ago, revenue, operating cash flow, free cash flow, and margin were all higher.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
$5.7B
Trailing twelve-month free cash flow.
Quarter free cash flow
$1.6B
Free cash flow in the selected fiscal quarter.
Operating cash flow
$1.7B
Cash generated by operations before capital spending.
CapEx
$15.0M
Capital spending and related asset purchases.
FCF margin
41.5%
The share of revenue converted into free cash flow.
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 |
|---|---|---|---|---|---|
| 2023-03-31 | $3.2B | $963.0M | $11.0M | $952.0M | 30.1% |
| 2023-06-30 | $3.2B | $1.2B | $15.0M | $1.1B | 35.9% |
| 2023-09-30 | $3.3B | $2.0B | $11.0M | $2.0B | 58.8% |
| 2023-12-31 | $4.0B | $1.7B | $15.0M | $1.6B | 41.5% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | 70.7% | 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.
Operating cash flow
Revenue increased, but operating cash flow declined, causing free cash flow to fall sequentially. The free cash flow margin contracted as a result.
Free cash flow was lower than the prior quarter despite higher revenue, driven by the decrease in operating cash flow.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
Revenue increased compared to the prior quarter, but operating cash flow decreased, leading to a lower free cash flow margin. Capital expenditure was slightly higher, contributing to the sequential decline in free cash flow.
Compared to the prior quarter, revenue was higher, while operating cash flow and free cash flow were lower, and the margin weakened. Compared to the same quarter a year ago, revenue, operating cash flow, free cash flow, and margin were all higher.
Monitor the conversion of revenue into operating cash flow, as the ratio weakened sequentially despite higher revenue.