New Relic Free Cash Flow observation - Wow!

Investment Analysis Clubs Saul’s Investing Discussions
#1

On New Relic’s FCF

This is another interesting observation I just made. Looking at the slide for TTM Free Cash Flow in the new slide deck that just came out, it shows 3% Free Cash Flow for fiscal 2018 (12 months ending in March), and 11% Free Cash Flow for the last 12 months.

Not much of a big deal, huh? Wow! It’s a very big deal! An enormous deal!

For fiscal 2018 (the four quarters ending in March) they had $355 million revenue. Now, 3% of that going into Free Cash Flow comes to $10.7 million in FCF spread out over the whole four quarters.

Now, at the end of June, they have $383 million in 12 month trailing revenue.

But 11% of $383 million as Free Cash Flow is $42.1 million, just one quarter later. That means that after having only $10.7 million in four quarters combined, their Free Cash Flow rose $31.4 million in this last quarter, in one quarter alone, to $42.1 million. That sounds like a big deal to me.

Saul

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#2

But 11% of $383 million as Free Cash Flow is $42.1 million, just one quarter later. That means that after having only $10.7 million in four quarters combined, their Free Cash Flow rose $31.4 million in this last quarter, in one quarter alone, to $42.1 million. That sounds like a big deal to me.

Maybe look at the June quarter from the prior year…the one that dropped off in the new calculation. If that prior June quarter had a negative CF and got replaced by a strongly positive most recent quarter then it explains the big one quarter swing. If true then the big change really occurred last year.

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#3

Careful…they collect the bulk of their receivables in the first quarter, so you may be just
looking at a timing effect. I don’t own them, don’t follow them, but a quick look tells me what
you’re looking at is just seasonal. - Ears

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