Free cash flow takeaway
A quick read on the company's cash generation and what it means for investors.
In the third quarter of fiscal 2023, free cash flow and the corresponding margin improved substantially compared to both the prior quarter and the same quarter a year ago, driven by stronger operating cash flows and controlled capital spending.
- Revenue remained stable sequentially while operating cash flow rose sharply, translating into much higher free cash flow. The free cash flow margin expanded as the conversion from revenue improved significantly. The company noted that working capital needs are typically greater in the first half of the year, which may have contributed to the seasonal pattern.
- Both operating cash flow and free cash flow were markedly higher than the immediately preceding quarter and the year-ago quarter, while capital expenditure was lower than the prior quarter but higher than a year earlier. This resulted in a significantly improved free cash flow margin relative to both periods.
FCF snapshot
Quarterly and TTM cash-flow metrics with the minimum valuation context.
TTM free cash flow
$403.0M
Trailing twelve-month free cash flow.
Quarter free cash flow
$273.5M
Free cash flow in the selected fiscal quarter.
Operating cash flow
$313.2M
Cash generated by operations before capital spending.
CapEx
$39.7M
Capital spending and related asset purchases.
FCF margin
20.0%
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 |
|---|---|---|---|---|---|
| 2022-12-31 | $1.1B | $132.2M | $34.1M | $98.1M | 9.0% |
| 2023-03-31 | $1.0B | -$78.8M | $35.4M | -$114.2M | -10.9% |
| 2023-06-30 | $1.4B | $195.5M | $49.9M | $145.6M | 10.3% |
| 2023-09-30 | $1.4B | $313.2M | $39.7M | $273.5M | 20.0% |
Cash conversion quality
Checks that separate high-quality free cash flow from accounting noise or working-capital timing.
| FCF / net income | 209.7% | Shows whether accounting earnings convert into cash. |
| CapEx / revenue | 2.9% | 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.
Strong operating cash flow
Operating cash flow increased considerably from the prior quarter and the same quarter last year, reflecting improved cash generation from operations.
This was the primary factor behind the substantial growth in free cash flow and margin expansion.
What the cash flow says
How to interpret the company's free cash flow beyond the headline number.
Revenue remained stable sequentially while operating cash flow rose sharply, translating into much higher free cash flow. The free cash flow margin expanded as the conversion from revenue improved significantly. The company noted that working capital needs are typically greater in the first half of the year, which may have contributed to the seasonal pattern.
Both operating cash flow and free cash flow were markedly higher than the immediately preceding quarter and the year-ago quarter, while capital expenditure was lower than the prior quarter but higher than a year earlier. This resulted in a significantly improved free cash flow margin relative to both periods.
Monitor the level of capital spending: although it declined sequentially, it was still higher than the year-ago period, and any further increase could affect future cash conversion.