What is the cash conversion cycle and free cash flow generation in the quarter and first half, and does it indicate sufficient liquidity for future growth?

Cash‑conversion cycle & free‑cash‑flow (FCF) – what we can glean from the release

The brief that Magic Software posted on 13 Aug 2025 only confirms that the company has released its Q2 2025 and H1 2025 results; it does not disclose the actual cash‑conversion‑cycle (CCC) or free‑cash‑flow figures for either period. Because the CCC is a function of days‑sales‑out‑standing, inventory turnover and days‑payable‑out‑standing, and FCF is derived from operating cash flow less cap‑ex, we need the underlying cash‑flow statement to calculate them. In the absence of those numbers, we can only draw conclusions from the surrounding fundamentals that the release hints at:

1. Liquidity backdrop – Magic’s “second‑quarter and first‑half” results are being reported as a “global provider of IT consulting services” with a “NASDAQ and TASE” listing, suggesting a sizable, publicly‑traded balance sheet. Historically, firms in this space generate strong operating cash flow (high‑margin services, low working‑capital intensity) and modest cap‑ex, which typically yields a short CCC (often <30 days) and positive FCF. The fact that the company is comfortable issuing a half‑year update implies it has enough cash on hand to meet reporting obligations and fund ongoing growth initiatives.

2. Implication for future growth – Assuming Magic continues its historical pattern—low inventory, high receivable turnover, and the ability to stretch payables—the CCC should remain tight, preserving cash. Positive free‑cash‑flow in both the quarter and the first half would further signal that the firm has the liquidity cushion to invest in platform expansion, pursue M&A, or increase R&D without resorting to external financing. In short, even though the exact numbers are not disclosed, the surrounding context points to adequate liquidity for near‑term growth.

Actionable take‑away for traders

• Monitor the forthcoming detailed earnings release (Form 8‑K / MD&A) for the exact CCC and FCF numbers. A CCC under 30 days and H1 FCF that exceeds the prior year’s level would be a bullish catalyst, likely prompting the stock to test upside resistance around its recent highs.
• If the detailed filing reveals accelerating FCF growth (e.g., >10% YoY) and a further compressed CCC, consider a long position or adding to existing exposure, especially on any pull‑back in price action.
• Conversely, if the CCC expands dramatically (e.g., >45 days) or H1 FCF turns negative, the liquidity story weakens, and a short‑side risk‑managed play may be warranted.

Until the precise cash‑flow metrics are released, the current narrative suggests sufficient liquidity to sustain Magic’s growth trajectory, but confirmation will come from the detailed financial tables. Keep a close eye on the next filing and be ready to act on the actual CCC/FCF data.