Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
In the third fiscal quarter of 2023, the company's free cash flow remained negative despite a near-flat operating cash flow and higher capital spending versus a year ago. Cash conversion weakened from the prior quarter, where free cash flow was positive, but improved relative to the same quarter last year.
- Revenue was unchanged sequentially and increased year-over-year, yet operating cash flow dropped sharply from the prior quarter and was positive only marginally, resulting in a negative free cash flow margin. Capital expenditure was higher than both comparison periods, amplifying the negative free cash flow.
- Compared to the previous quarter, free cash flow shifted from a sizable positive to a negative figure, driven by a much lower operating cash flow. Versus the same quarter a year ago, free cash flow was less negative, primarily because operating cash flow turned from deeply negative to mildly positive.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
-$149.0M
Trailing twelve-month free cash flow.
Quarter free cash flow
-$16.7M
Free cash flow in the selected fiscal quarter.
Operating cash flow
$8.7M
Cash generated by operations before capital spending.
CapEx
$25.4M
Capital spending and related asset purchases.
FCF margin
-1.6%
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 |
|---|---|---|---|---|---|
| 2022-10-29 | $971.0M | -$14.5M | $23.9M | -$38.4M | -4.0% |
| 2023-01-28 | $1.1B | -$265.6M | $30.0M | -$295.7M | -28.0% |
| 2023-04-29 | $1.1B | $229.8M | $28.0M | $201.8M | 17.8% |
| 2023-07-29 | $1.1B | $8.7M | $25.4M | -$16.7M | -1.6% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | -56.2% | Shows whether accounting earnings convert into cash. |
| CapEx / revenue | 2.4% | Lower capital intensity usually supports FCF margin. |
| Net cash | -$437.9M | 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 volatility
Operating cash flow dropped dramatically from the prior quarter, falling from a robust level to a near-breakeven amount. This change was the strongest observable factor behind the negative free cash flow, as revenue remained stable sequentially.
The sharp reduction in operating cash flow transformed free cash flow from positive to negative despite stable revenue.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
Revenue was unchanged sequentially and increased year-over-year, yet operating cash flow dropped sharply from the prior quarter and was positive only marginally, resulting in a negative free cash flow margin. Capital expenditure was higher than both comparison periods, amplifying the negative free cash flow.
Compared to the previous quarter, free cash flow shifted from a sizable positive to a negative figure, driven by a much lower operating cash flow. Versus the same quarter a year ago, free cash flow was less negative, primarily because operating cash flow turned from deeply negative to mildly positive.
Monitor whether operating cash flow can sustain positive levels given the significant sequential decline.