Strong revenue growth with weaker margin conversion and negative discrete-quarter free cash flow
SELL/AVOID; valuation and cash-conversion gates are not cleared
- Posture
- SELL/AVOID; valuation and cash-conversion gates are not cleared
- Business phase
- 4
- Next proof
- Quarterly results refresh, Cash and margin gate
- Valuation
- Unavailable
| # | KPI | Baseline | Next threshold | Signal | Investor read | Source |
|---|---|---|---|---|---|---|
| 1 | RevenueQ2 FY2026 | $953.1M | At least $900M | Confirmed | The latest result clears the confirmation threshold. | Revenue official source (2026-07-31) |
| 2 | Capital expendituresQ2 FY2026 | $17.4M | Next comparable update | Deteriorating | +150.8% YoY | Capital expenditures official source (2026-07-31) |
| 3 | Diluted EPSQ2 FY2026 | 1.13 | Next comparable update | Deteriorating | -12.4% QoQ | Diluted EPS official source (2026-07-31) |
| 4 | Free cash flowQ2 FY2026 | $-122.6M | Above $0 | Below confirm | The latest result has not yet cleared the confirmation threshold. | Free cash flow official source (2026-07-31) |
| 5 | Total debtQ2 FY2026 | $3.5B | Stay at or below $3.5B | Near threshold | The KPI is still on the safe side, but close enough that the next update matters. | Total debt official source (2026-07-31) |
| 6 | Operating income / EBITQ2 FY2026 | $194.8M | Next comparable update | Deteriorating | -7.4% YoY | Operating income / EBIT official source (2026-07-31) |
| 7 | Gross profitQ2 FY2026 | $317.3M | Next comparable update | Improving | +3.4% YoY | Gross profit official source (2026-07-31) |
| 8 | Operating cash flowQ2 FY2026 | $-105.2M | Next comparable update | Improving | +4.6% YoY | Operating cash flow official source (2026-07-31) |
| 9 | Net income attributable to commonQ2 FY2026 | $125.1M | Next comparable update | Deteriorating | -22.6% YoY | Net income attributable to common official source (2026-07-31) |
| 10 | Gross marginQ2 FY2026 | 33.3% | Stay at or above 35% | Watch | The latest result has crossed the warning threshold. | Gross margin official source (2026-07-31) |
| 11 | Current AssetsQ2 FY2026 | $2.5B | Next comparable update | Insufficient_Data | Comparable history available | Current Assets official source (2026-07-31) |
| 12 | Operating marginQ2 FY2026 | 20.4% | Stay at or above 20% | Near threshold | The KPI is still on the safe side, but close enough that the next update matters. | Operating margin official source (2026-07-31) |
| 13 | Diluted weighted-average sharesQ2 FY2026 | 104M | Next comparable update | Deteriorating | +0.9% YoY | Diluted weighted-average shares official source (2026-07-31) |
| 14 | Cash and equivalentsQ2 FY2026 | $337.2M | Next comparable update | Insufficient_Data | Comparable history available | Cash and equivalents official source (2026-07-31) |
| 15 | Current LiabilitiesQ2 FY2026 | $481.2M | Next comparable update | Insufficient_Data | Comparable history available | Current Liabilities official source (2026-07-31) |
How to read the scorecard: Signals compare the latest baseline with the stated decision threshold. “Monitor” means the public handoff has one valid baseline but no compatible prior observation; it is not a positive or negative call.
KPI ontology coverage
Company definitions: 0. Coverage: No compatible sector, subsector, or business-model module was evidenced.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.; Company definition is supported only by private or local provenance.
| Module | Level | Version |
|---|---|---|
| Special situations | cross_cutting | v1 |
| Universal financial core | universal | v1 |
Quarterly KPI trajectory
Coverage: 70 reported observations across a 12-quarter snapshot; 66 explicit gaps. 33 derived from aligned ytd, 37 reported. Acquisition status: not public.
| KPI | Current | Previous quarter | Year ago | QoQ | YoY | Eight-quarter trend | Management explanation | Investor interpretation | Source |
|---|---|---|---|---|---|---|---|---|---|
| Current Assets | $2.5B (Q2 FY2026) | — | — | — | — | $2.5B | No supported explanation | insufficient_data; no threshold configured; confidence low | Primary source (2026-07-31) |
| Current Liabilities | $481.2M (Q2 FY2026) | — | — | — | — | $481.2M | No supported explanation | insufficient_data; no threshold configured; confidence low | Primary source (2026-07-31) |
| Capital expenditures | $17.4M (Q2 FY2026) | $6.6M (Q1 FY2026) | $6.9M (Q2 FY2025) | +161.6% | +150.8% | $4.2M → $6.9M → $6.4M → $10.2M → $6.6M → $17.4M | The latest quarter-over-quarter capital-expenditure movement remains an explicit unexplained residual; no management attribution was encoded beyond the reported filing value. (unknown) | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Cash and equivalents | $337.2M (Q2 FY2026) | — | — | — | — | $337.2M | No supported explanation | insufficient_data; no threshold configured; confidence low | Primary source (2026-07-31) |
| Diluted EPS | 1.13 (Q2 FY2026) | 1.29 (Q1 FY2026) | 1.57 (Q2 FY2025) | -12.4% | — | 0.87 → 1.57 → 1.1 → 1.08 → 1.29 → 1.13 | The latest quarter-over-quarter diluted EPS decline remains an explicit unexplained residual; no management attribution was encoded beyond the reported EPS observation. (unknown) | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Diluted weighted-average shares | 104M (Q2 FY2026) | 104.3M (Q1 FY2026) | 103.1M (Q2 FY2025) | -0.2% | +0.9% | 103.2M → 103.1M → 104M → -104799 → 104.3M → 104M | No supported explanation | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Free cash flow | $-122.6M (Q2 FY2026) | $-166.7M (Q1 FY2026) | $-117.2M (Q2 FY2025) | +26.5% | -4.6% | $-30.1M → $-117.2M → $-1.8M → $-189.3M → $-166.7M → $-122.6M | The latest quarter-over-quarter operating-cash-flow and derived free-cash-flow movements remain explicit unexplained residuals; no management attribution was encoded beyond the reported cash-flow value. (unknown) | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Gross margin | 33.3% (Q2 FY2026) | 36.9% (Q1 FY2026) | 45.4% (Q2 FY2025) | -360 bps | -1210 bps | 50.5% → 45.4% → 45.6% → 44.3% → 36.9% → 33.3% | Management attributed the year-over-year revenue increase to operating revenue components and attributed the accompanying cost-of-sales increase primarily to higher engine, module, and parts sales; this explains the revenue and cost/margin movement without licensed sources. (unknown) | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Gross profit | $317.3M (Q2 FY2026) | $306.4M (Q1 FY2026) | $307M (Q2 FY2025) | +3.5% | +3.4% | $253.4M → $307M → $304.1M → $293.2M → $306.4M → $317.3M | No supported explanation | improving; no threshold configured; confidence high | Primary source (2026-07-31) |
| Net income attributable to common | $125.1M (Q2 FY2026) | $134.2M (Q1 FY2026) | $161.7M (Q2 FY2025) | -6.8% | -22.6% | $89.9M → $161.7M → $114M → $111.9M → $134.2M → $125.1M | No supported explanation | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Operating cash flow | $-105.2M (Q2 FY2026) | $-160.1M (Q1 FY2026) | $-110.3M (Q2 FY2025) | +34.3% | +4.6% | $-26M → $-110.3M → $4.6M → $-179.1M → $-160.1M → $-105.2M | The latest quarter-over-quarter operating-cash-flow and derived free-cash-flow movements remain explicit unexplained residuals; no management attribution was encoded beyond the reported cash-flow value. (unknown) | improving; no threshold configured; confidence high | Primary source (2026-07-31) |
| Operating income / EBIT | $194.8M (Q2 FY2026) | $170.4M (Q1 FY2026) | $210.5M (Q2 FY2025) | +14.3% | -7.4% | $151M → $210.5M → $200.9M → $179M → $170.4M → $194.8M | Management attributed the year-over-year revenue increase to operating revenue components and attributed the accompanying cost-of-sales increase primarily to higher engine, module, and parts sales; this explains the revenue and cost/margin movement without licensed sources. (unknown) | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Operating margin | 20.4% (Q2 FY2026) | 20.5% (Q1 FY2026) | 31.1% (Q2 FY2025) | -7 bps | -1069 bps | 30.1% → 31.1% → 30.1% → 27% → 20.5% → 20.4% | No supported explanation | deteriorating; no threshold configured; confidence high | Primary source (2026-07-31) |
| Revenue | $953.1M (Q2 FY2026) | $830.7M (Q1 FY2026) | $676.2M (Q2 FY2025) | +14.7% | +40.9% | $502.1M → $676.2M → $667.1M → $662M → $830.7M → $953.1M | Management attributed the year-over-year revenue increase to operating revenue components and attributed the accompanying cost-of-sales increase primarily to higher engine, module, and parts sales; this explains the revenue and cost/margin movement without licensed sources. (unknown) | improving; no threshold configured; confidence high | Primary source (2026-07-31) |
| Total debt | $3.5B (Q2 FY2026) | — | — | — | — | $3.5B | No supported explanation | insufficient_data; no threshold configured; confidence low | Primary source (2026-07-31) |
Complete 12-quarter reported history
| KPI | Period | Value | QoQ | YoY | Source |
|---|---|---|---|---|---|
| Capital expenditures | Q2 FY2026 | $17.4M | +161.6% | +150.8% | Primary source (2026-07-31) |
| Capital expenditures | Q1 FY2026 | $6.6M | -34.9% | +59.8% | Primary source (2026-05-01) |
| Capital expenditures | Q4 FY2025 | $10.2M | +58.7% | — | Primary source (2026-02-27) |
| Capital expenditures | Q3 FY2025 | $6.4M | -7.3% | — | Primary source (2025-10-29) |
| Capital expenditures | Q2 FY2025 | $6.9M | +66.7% | — | Primary source (2025-07-31) |
| Capital expenditures | Q1 FY2025 | $4.2M | — | — | Primary source (2025-05-05) |
| Cash and equivalents | Q2 FY2026 | $337.2M | — | — | Primary source (2026-07-31) |
| Current Assets | Q2 FY2026 | $2.5B | — | — | Primary source (2026-07-31) |
| Current Liabilities | Q2 FY2026 | $481.2M | — | — | Primary source (2026-07-31) |
| Diluted EPS | Q2 FY2026 | 1.13 | -12.4% | — | Primary source (2026-07-31) |
| Diluted EPS | Q1 FY2026 | 1.29 | — | — | Primary source (2026-07-31) |
| Diluted EPS | Q4 FY2025 | 1.08 | -1.8% | — | Primary source (2026-02-27) |
| Diluted EPS | Q3 FY2025 | 1.1 | -29.9% | — | Primary source (2025-10-29) |
| Diluted EPS | Q2 FY2025 | 1.57 | +80.5% | — | Primary source (2025-07-31) |
| Diluted EPS | Q1 FY2025 | 0.87 | — | — | Primary source (2025-05-05) |
| Diluted weighted-average shares | Q2 FY2026 | 104M | -0.2% | +0.9% | Primary source (2026-07-31) |
| Diluted weighted-average shares | Q1 FY2026 | 104.3M | +99581.8% | +1.1% | Primary source (2026-05-01) |
| Diluted weighted-average shares | Q4 FY2025 | -104799 | -100.1% | — | Primary source (2026-02-27) |
| Diluted weighted-average shares | Q3 FY2025 | 104M | +0.8% | — | Primary source (2025-10-29) |
| Diluted weighted-average shares | Q2 FY2025 | 103.1M | -0.0% | — | Primary source (2026-07-31) |
| Diluted weighted-average shares | Q1 FY2025 | 103.2M | — | — | Primary source (2025-05-05) |
| Free cash flow | Q2 FY2026 | $-122.6M | +26.5% | -4.6% | Primary source (2026-07-31) |
| Free cash flow | Q1 FY2026 | $-166.7M | +11.9% | -453.5% | Primary source (2026-05-01) |
| Free cash flow | Q4 FY2025 | $-189.3M | -10369.0% | — | Primary source (2026-02-27) |
| Free cash flow | Q3 FY2025 | $-1.8M | +98.5% | — | Primary source (2025-10-29) |
| Free cash flow | Q2 FY2025 | $-117.2M | -289.2% | — | Primary source (2025-07-31) |
| Free cash flow | Q1 FY2025 | $-30.1M | — | — | Primary source (2025-05-05) |
| Gross margin | Q2 FY2026 | 33.3% | -360 bps | -1210 bps | Primary source (2026-07-31) |
| Gross margin | Q1 FY2026 | 36.9% | -740 bps | -1358 bps | Primary source (2026-05-01) |
| Gross margin | Q4 FY2025 | 44.3% | -131 bps | — | Primary source (2026-02-27) |
| Gross margin | Q3 FY2025 | 45.6% | +20 bps | — | Primary source (2025-10-29) |
| Gross margin | Q2 FY2025 | 45.4% | -507 bps | — | Primary source (2025-07-31) |
| Gross margin | Q1 FY2025 | 50.5% | — | — | Primary source (2025-05-05) |
| Gross profit | Q2 FY2026 | $317.3M | +3.5% | +3.4% | Primary source (2026-07-31) |
| Gross profit | Q1 FY2026 | $306.4M | +4.5% | +20.9% | Primary source (2026-05-01) |
| Gross profit | Q4 FY2025 | $293.2M | -3.6% | — | Primary source (2026-02-27) |
| Gross profit | Q3 FY2025 | $304.1M | -0.9% | — | Primary source (2025-10-29) |
| Gross profit | Q2 FY2025 | $307M | +21.2% | — | Primary source (2025-07-31) |
| Gross profit | Q1 FY2025 | $253.4M | — | — | Primary source (2025-05-05) |
| Net income attributable to common | Q2 FY2026 | $125.1M | -6.8% | -22.6% | Primary source (2026-07-31) |
| Net income attributable to common | Q1 FY2026 | $134.2M | +20.0% | +49.2% | Primary source (2026-05-01) |
| Net income attributable to common | Q4 FY2025 | $111.9M | -1.9% | — | Primary source (2026-02-27) |
| Net income attributable to common | Q3 FY2025 | $114M | -29.5% | — | Primary source (2025-10-29) |
| Net income attributable to common | Q2 FY2025 | $161.7M | +79.8% | — | Primary source (2026-07-31) |
| Net income attributable to common | Q1 FY2025 | $89.9M | — | — | Primary source (2025-05-05) |
| Operating cash flow | Q2 FY2026 | $-105.2M | +34.3% | +4.6% | Primary source (2026-07-31) |
| Operating cash flow | Q1 FY2026 | $-160.1M | +10.6% | -516.5% | Primary source (2026-05-01) |
| Operating cash flow | Q4 FY2025 | $-179.1M | -3977.8% | — | Primary source (2026-02-27) |
| Operating cash flow | Q3 FY2025 | $4.6M | +104.2% | — | Primary source (2025-10-29) |
| Operating cash flow | Q2 FY2025 | $-110.3M | -324.9% | — | Primary source (2025-07-31) |
| Operating cash flow | Q1 FY2025 | $-26M | — | — | Primary source (2025-05-05) |
| Operating income / EBIT | Q2 FY2026 | $194.8M | +14.3% | -7.4% | Primary source (2026-07-31) |
| Operating income / EBIT | Q1 FY2026 | $170.4M | -4.8% | +12.9% | Primary source (2026-05-01) |
| Operating income / EBIT | Q4 FY2025 | $179M | -10.9% | — | Primary source (2026-02-27) |
| Operating income / EBIT | Q3 FY2025 | $200.9M | -4.6% | — | Primary source (2025-10-29) |
| Operating income / EBIT | Q2 FY2025 | $210.5M | +39.4% | — | Primary source (2026-07-31) |
| Operating income / EBIT | Q1 FY2025 | $151M | — | — | Primary source (2025-05-05) |
| Operating margin | Q2 FY2026 | 20.4% | -7 bps | -1069 bps | Primary source (2026-07-31) |
| Operating margin | Q1 FY2026 | 20.5% | -652 bps | -956 bps | Primary source (2026-05-01) |
| Operating margin | Q4 FY2025 | 27% | -308 bps | — | Primary source (2026-02-27) |
| Operating margin | Q3 FY2025 | 30.1% | -101 bps | — | Primary source (2025-10-29) |
| Operating margin | Q2 FY2025 | 31.1% | +106 bps | — | Primary source (2026-07-31) |
| Operating margin | Q1 FY2025 | 30.1% | — | — | Primary source (2025-05-05) |
| Revenue | Q2 FY2026 | $953.1M | +14.7% | +40.9% | Primary source (2026-07-31) |
| Revenue | Q1 FY2026 | $830.7M | +25.5% | +65.5% | Primary source (2026-05-01) |
| Revenue | Q4 FY2025 | $662M | -0.8% | — | Primary source (2026-02-27) |
| Revenue | Q3 FY2025 | $667.1M | -1.4% | — | Primary source (2025-10-29) |
| Revenue | Q2 FY2025 | $676.2M | +34.7% | — | Primary source (2026-07-31) |
| Revenue | Q1 FY2025 | $502.1M | — | — | Primary source (2025-05-05) |
| Total debt | Q2 FY2026 | $3.5B | — | — | Primary source (2026-07-31) |
Thesis signals
Thesis pillars
- Operating scale is establishedFY2026 Q2 revenue of $953.1 million and 40.9% year-over-year growth demonstrate substantial operating scale, but scale must still convert into economics.
- Margin quality is the first proof gateGross margin of 33.3% and operating margin of 20.4% show that Q2 revenue growth did not translate proportionally into profit growth.
- Cash conversion is the decisive confirmation gateDiscrete-quarter free cash flow remained negative and trailing-four-quarter free cash flow was negative $480.4 million, limiting confidence in earnings quality.
- Liquidity is adequate but leverage constrains flexibilityCurrent liquidity is ample on snapshot measures, but $3.50 billion of debt and weak cash conversion support a cautious security posture.
Catalysts
- Positive cash conversionSustained positive discrete-quarter free cash flow would improve earnings quality and reduce the present soft block.
- Margin stabilizationGross margin above 35% and operating margin above 20% while revenue grows would support durable operating leverage.
Risks
- Margin compressionMix and cost-of-sales pressure could keep profit growth below revenue growth.
- Cash conversion and leverageNegative free cash flow alongside substantial debt can reduce strategic flexibility.
Monitoring triggers
- Quarterly results refresh
- Cash and margin gate
Evidence limits
Conflicts
- None reported.
Gaps
- None reported.
Public sources
- Primary source (2026-07-31)
- Primary source (2026-05-01)
- Primary source (2026-02-27)
- Primary source (2025-10-29)
- Primary source (2025-07-31)
- Primary source (2025-05-05)