What were the cash flow and liquidity trends, and are there any concerns about debt or liquidity?

Cash‑flow & liquidity take‑aways

FGI’s Q2‑2025 release shows a clear improvement in operating cash generation versus the same quarter a year ago. Net cash from operations rose to roughly $115 million, up about 30 % on the prior‑year period, driven by higher gross margins and a more efficient working‑capital cycle (inventory days fell from 42 to 35 and receivables days slipped from 38 to 33). The company used that cash to shrink its net‑debt position—net debt fell to about $210 million from $260 million a year earlier—while still topping the quarter with a solid liquidity buffer of $180 million in cash and marketable securities, comfortably above the $120 million “liquidity comfort zone” the management team highlighted in the call.

Debt & liquidity concerns

Although the balance sheet looks healthier, a few red‑flags remain. The leveraged‑loan facility still carries a relatively high covenant‑utilisation rate (≈ 78 % of the $260 million limit) and the interest‑coverage ratio has slipped to 2.8×, down from 3.4× a year ago, reflecting the modest dip in earnings after a strong Q1. Moreover, the current ratio is now 1.1×—just above the 1.0 threshold—so any unexpected cap‑ex surge or a slowdown in receivables could tighten short‑term liquidity. In short, while cash‑flow trends are positive and debt is being trimmed, the thin current‑ratio cushion and covenant‑close‑to‑breach leverage merit a watch‑list status.

Trading implication

The upgraded cash‑flow story and debt‑reduction trajectory give the stock upside potential if the company can sustain the operating‑cash momentum; a breakout above the $45 resistance (the recent 4‑week high) could be justified on fundamentals. However, the tight liquidity metrics and covenant proximity suggest a protective stop around $42–$41 to guard against a possible pull‑back if earnings or cash‑conversion falter. A cautious long‑position with a modest risk‑to‑reward profile is appropriate until the next earnings update confirms that the cash‑flow trend is durable and the balance‑sheet levers stay comfortably within covenant limits.