What is the cash conversion cycle and free cash flow generation in the second quarter, and what does it imply for liquidity?

Answer Overview

The press release you referenced provides the headline financial results for Mayville Engineering Company (MEC) for Q2 2025—key figures such as net sales, GAAP net loss, and Adjusted EBITDA. However, the release does not disclose:

• The Cash Conversion Cycle (CCC) – the metric that shows how many days it takes for the company to convert cash spent on inventory and other operating assets into cash received from customers, nor the component elements (Days Inventory Outstanding, Days Sales Outstanding, Days Payables Outstanding) that would allow us to calculate it.
  
• The Free Cash Flow (FCF) generated in the quarter – i.e., cash flow from operating activities after subtracting capital expenditures, or any explicit statement of “free cash flow” in the release.

Because those two pieces of information are missing, a precise calculation or interpretation of MEC’s liquidity position based on the cash conversion cycle and free‑cash‑flow numbers cannot be performed from the information you have provided.

1. What We Would Need to Compute the CCC and FCF

Without the balance‑sheet items (inventory, A/R, A/P) and the cash‑flow statement (or at least the CFO and CapEx figures), we cannot derive the CCC or the amount of free cash generated.

2. Why These Metrics Matter for Liquidity

• Cash‑Conversion Cycle (CCC) – A shorter (or negative) CCC means the company recovers cash quickly from its working‑capital investments, which generally supports a stronger cash position and reduces reliance on external financing. A longer CCC can signal higher working‑capital requirements, putting pressure on liquidity.

• Free Cash Flow (FCF) – Positive FCF indicates that the business generates enough cash after capital spending to fund dividends, share repurchases, debt reduction, or reinvestment without needing to raise additional capital. Negative FCF can be a warning sign if it persists, potentially leading to liquidity strains.

Thus, knowing the CCC and FCF is essential for assessing MEC’s ability to meet short‑term obligations, fund growth, and maintain a healthy cash balance. In the absence of those numbers, the only liquidity indicator we can comment on from the press release is the adjusted EBITDA of $13.7 million, which provides a rough sense of operating cash generation before working‑capital and cap‑ex adjustments.

3. How to Obtain the Missing Information

1. SEC Form 10‑Q (Quarterly Report) – MEC’s filing for Q2 2025 (10‑Q) will contain:

   • The Consolidated Balance Sheet (for inventory, accounts receivable, accounts payable).
   • The Consolidated Statement of Cash Flows (for CFO and CapEx).
   • The Notes that often provide a discussion of the cash conversion cycle and free‑cash‑flow analysis.

2. Investor Relations Materials – MEC may publish an “Investor Presentation” or a “Quarterly Financial Review” that includes a working‑capital summary and a cash‑flow analysis.

3. Third‑party Financial Platforms – Services such as Bloomberg, FactSet, S&P Capital IQ, or Yahoo Finance often provide derived metrics (CCC, free cash flow) when they have access to the company’s filings.

4. Bottom‑Line Take‑away

• Based on the news release alone, we cannot determine the cash conversion cycle or the amount of free cash generated in Q2 2025.
• Therefore, we also cannot draw a direct conclusion about MEC’s liquidity from those specific metrics.
• To evaluate liquidity comprehensively, you’ll need to retrieve MEC’s Q2 2025 10‑Q (or another detailed financial filing) and compute the CCC and free‑cash‑flow using the formulas above. Once you have those numbers, you can compare them to prior periods and industry benchmarks to assess whether MEC’s liquidity is improving, stable, or deteriorating.
  

If you can provide the balance‑sheet and cash‑flow data from MEC’s 10‑Q, I’d be happy to calculate the CCC, free cash flow, and interpret the liquidity implications for you.