Electromed, Inc. (ELMD) Cash Flow Statement

The ten-quarter OCF/NI ratio averaging above 1.0 suggests ELMD's earnings are not merely accrual-driven, but the dispersion matters: ratios ranged from 0.08 to 2.46, meaning any single-quarter conversion reading is heavily contaminated by working capital timing. Given that prior income statement work already flagged stock-based compensation at roughly 22% of 2026Q4 net income, the headline conversion advantage appears real in aggregate yet structurally sensitive to non-cash add-backs and collection timing; investors should treat quarterly OCF/NI as noisy rather than as a clean quality-of-earnings signal.

Despite the steady double-digit revenue climb and margin expansion documented in the income statement analysis, the FCF margin trend does not confirm a corresponding cash compounding path — 2026Q4's 14.0% FCF margin sits well below 2024Q4's 30.0% and 2025Q4's 21.3%. The 2026Q1 negative FCF print of -$98K appears largely attributable to the $2.7M working capital drag rather than operating deterioration, but the pattern implies that reported profitability gains have yet to convert into a structurally higher FCF run-rate. This divergence between rising net income (from $1.8M to $3.4M quarterly) and a non-trending FCF margin warrants monitoring.

Capex tracking near or below depreciation in most quarters suggests the business is largely living off its existing asset base rather than funding expansion capital, which helps explain why FCF approximates operating cash flow so closely. However, this low capital intensity also means ELMD's reported margins are not being burdened by growth investment, so the 78.7% gross margin durability question raised in the income statement analysis cannot be dismissed on the grounds that the company is underinvesting in its platform. The judgment for analysts is whether sub-2% capex intensity reflects a genuinely capital-light model or deferred maintenance that could surface later.

The sign and magnitude of the working capital line, rather than operating performance, appears to be the primary driver of quarter-to-quarter cash flow variability, with contributions ranging from +$2.6M to -$2.7M within a ten-quarter span. For a device company growing revenue at 11.6% year over year, persistent negative working capital contributions in recent quarters may indicate that receivable build-up is absorbing cash faster than payables are offsetting it — though the data does not disaggregate the components. The absence of a consistent working capital release pattern amid revenue growth suggests conversion efficiency should be monitored rather than assumed.

Repurchases equating to roughly 54% of cumulative FCF indicate an aggressive return-of-capital posture funded internally, with no acquisition activity recorded in the period to compete for cash. The concentrated buyback quarters — $4.5M in 2025Q1 and $3.7M in 2025Q4 — preceded the weak 2026Q1 cash quarter, which may suggest capital was deployed ahead of working capital absorption, though causation cannot be established from the data. With no dividend policy and no disclosed debt reduction, investors should assess whether the buyback pace is sustainable through quarters where FCF margin compresses toward single digits.