What is the cash‑conversion cycle and expected free cash flow generation from the reported results?
Answer
The press‑release you quoted from U.S. Physical Therapy (USPH) only provides a very limited set of financial highlights for the three‑month period ending June 30 2025 (the “2025 Second Quarter”). The key figures disclosed are:
| Metric | Value |
|---|---|
| Adjusted EBITDA (non‑GAAP) | $26.9 million |
| Change vs. prior period | + $4.7 million |
No other balance‑sheet or cash‑flow data (e.g., working‑capital items, cash collections, inventory, accounts payable/receivable, capital expenditures, or operating cash flow) are included in the release. Consequently, the specific cash‑conversion cycle (CCC) and the expected free cash flow (FCF) generation for the quarter cannot be calculated from the information provided.
Below is a brief overview of what each term means, why the missing data matters, and where you could obtain the needed numbers if you need a precise calculation.
1. Cash‑Conversion Cycle (CCC)
Definition
The cash‑conversion cycle measures the number of days it takes a company to turn its cash outlays for inventory and other inputs into cash received from customers. It is typically expressed as:
[
\text{CCC} = \text{Days Inventory Outstanding (DIO)} + \text{Days Sales Outstanding (DSO)} - \text{Days Payables Outstanding (DPO)}
]
- DIO – How long inventory sits on the shelves before being sold.
- DSO – How long after a sale the company collects cash from the customer.
- DPO – How long the company can defer paying its suppliers.
Why it matters
A shorter CCC indicates a more efficient operating model and generally supports stronger cash‑flow generation, which can be used for debt repayment, reinvestment, or distribution to shareholders.
Data required from USPH’s Q2 2025 results
| Required metric | Where it would appear |
|---|---|
| Inventory balance (beginning & ending) | Balance sheet (or footnotes) |
| Cost of goods sold (COGS) or cost of services | Statement of operations |
| Accounts receivable (beginning & ending) | Balance sheet |
| Net credit sales | Statement of operations |
| Accounts payable (beginning & ending) | Balance sheet |
| Purchases / cost of services | Statement of operations or cash‑flow statement |
Because none of these line items are disclosed in the brief news release, the CCC cannot be derived.
2. Expected Free Cash Flow (FCF) Generation
Definition
Free cash flow is the cash that remains after a company covers its operating expenses and capital expenditures (CapEx). The most common formula is:
[
\text{FCF} = \text{Operating Cash Flow (OCF)} - \text{CapEx}
]
Alternatively, analysts sometimes start from Adjusted EBITDA and adjust for:
- Changes in working capital (ΔWC)
- Taxes on earnings
- Interest expense (net of any tax shield)
- Capital expenditures
- Other non‑cash items (e.g., depreciation & amortization)
Why it matters
FCF is the primary metric used to assess a firm’s ability to:
- Service debt
- Fund growth initiatives (e.g., new clinic openings)
- Return capital to shareholders (dividends, share repurchases)
- Provide a cushion against economic downturns
Data required from USPH’s Q2 2025 results
| Required metric | Where it would appear |
|---|---|
| Operating cash flow (or cash from operations) | Statement of cash flows |
| Capital expenditures (CapEx) | Statement of cash flows (investing activities) |
| Changes in working capital | Cash‑flow statement reconciliation or balance‑sheet footnotes |
| Tax expense (cash) | Cash‑flow statement (or tax footnote) |
| Interest expense (cash) | Cash‑flow statement (or footnote) |
| Depreciation & amortization | Statement of cash flows (non‑cash adjustments) |
The press release only supplies Adjusted EBITDA ($26.9 M). While Adjusted EBITDA is a useful proxy for cash‑generating ability, it is not a cash‑flow measure because it excludes:
- Working‑capital changes (e.g., increases in accounts receivable or inventory)
- Capital spending needed to maintain or expand the clinic network
- Cash taxes and interest (even if interest is net‑of‑tax)
- Other non‑operating cash inflows/outflows (e.g., asset sales, financing activities)
Therefore, without the cash‑flow statement or at least the balance‑sheet line items, we cannot reliably estimate the free cash flow for the quarter.
3. How to Obtain the Missing Information
- SEC Filings (Form 10‑Q) – Public companies file quarterly reports with the SEC that include:
- Full balance sheet (assets, liabilities, equity)
- Statement of cash flows (operating, investing, financing sections)
- Notes that often break out inventory, receivables, payables, and CapEx details.
For USPH, the Form 10‑Q for the quarter ending June 30 2025 will be posted on the SEC’s EDGAR system (usually within 45 days after quarter‑end).
Investor Relations Website – Companies often post a “Quarterly Results” PowerPoint or PDF that contains a slide‑deck with operating metrics, cash‑flow highlights, and sometimes a “Cash‑Conversion Cycle” KPI.
Conference Call Transcript – If USPH held a management‑call after the release, the transcript may include management commentary on cash‑flow expectations, working‑capital trends, and any initiatives to improve the CCC.
Analyst Reports – Equity research analysts (e.g., from Baird, Stifel, or boutique firms) frequently calculate CCC and FCF in their coverage notes. These reports are sometimes available through brokerage platforms or can be requested from the firm’s IR department.
4. Practical Take‑aways for Stakeholders
| Stakeholder | What you can infer from the current release | What you still need to know |
|---|---|---|
| Investors | Adjusted EBITDA grew by $4.7 M vs. the prior quarter, indicating improving operating profitability. | Exact cash‑generation (OCF, FCF) and working‑capital efficiency (CCC) to gauge liquidity and funding capacity. |
| Creditors | Higher EBITDA may support debt‑service ratios, but without cash‑flow data the coverage ratio remains unknown. | Current operating cash flow, CapEx, and net cash‑position to assess covenant compliance. |
| Management | The positive EBITDA trend is a good sign, but internal cash‑management metrics (CCC, FCF) are needed to drive clinic‑opening plans and injury‑prevention service expansion. | Detailed cash‑flow forecasts, inventory turnover, receivable/payable aging to manage cash‑needs. |
| Employees/Partners | A stronger EBITDA could translate into reinvestment in facilities or employee programs. | Whether free cash is sufficient to fund new hires, training, or equipment upgrades. |
5. Bottom‑Line Answer
Based solely on the news excerpt you provided, the cash‑conversion cycle and the expected free cash flow generation for U.S. Physical Therapy’s second quarter of 2025 are not disclosed. The release only reports Adjusted EBITDA of $26.9 million (up $4.7 million from the prior period). To calculate the CCC and FCF, you would need additional data that is typically found in the company’s quarterly SEC filing (Form 10‑Q) or a more detailed earnings presentation.
If you can obtain the full Form 10‑Q for the quarter ended June 30 2025, you will be able to:
- Compute the cash‑conversion cycle by extracting inventory, accounts receivable, and accounts payable balances and applying the standard CCC formula.
- Estimate free cash flow by taking operating cash flow from the cash‑flow statement and subtracting capital expenditures (and, if desired, adjusting for working‑capital changes and cash taxes/interest).
Until those supplemental disclosures are available, any precise estimate of the CCC or FCF would be speculative. If you locate the Form 10‑Q or a detailed earnings deck, feel free to share the relevant line items and I can walk you through the calculations step‑by‑step.