Haemonetics Corporation (HAE) Cash Flow Statement

The OCF/NI ratio swung from -3.52 in Q4 FY2026 to 1.59 in Q1 FY2027, reflecting the impact of a large capex outlay and working capital swings. While the positive ratios in recent quarters suggest cash generation is robust, the negative quarters highlight that net income is not always a reliable proxy for cash flow. Investors should monitor the sustainability of this conversion, especially given the volatility in working capital changes.

The FCF trajectory shows a sharp recovery from the -$33.1M in Q1 FY2025 to $44.4M in Q1 FY2027, driven by improved operating cash flow and normalized capex. However, the elevated capex in Q4 FY2026 (22.5% of revenue) suggests a one-time investment, likely in placed equipment or acquisitions, which may pressure near-term FCF. The recent quarterly beat and raised guidance suggest this investment is expected to yield growth, but the TTM revenue decline of 2.0% warrants caution.

The capex-to-revenue ratio remained low (1-3%) in most quarters, suggesting a relatively asset-light model for a medical device company. However, the Q4 FY2026 spike to 22.5% indicates a significant capital outlay, possibly for placed equipment or integration costs. This investment appears to be a one-time event, as Q1 FY2027 reverted to 2.3%, but it may signal a shift toward more capital-intensive growth initiatives. The depreciation and amortization of $27-29M per quarter suggests a stable asset base, but the recent spike could lead to higher future depreciation.

The working capital changes are highly volatile, with negative changes in five of the last ten quarters, indicating that collections, inventory, or payables management is inconsistent. The -$82.6M in Q1 FY2025 and -$55.5M in Q1 FY2026 were particularly large, suggesting potential issues with receivables or inventory build-up. However, the positive changes in Q2 FY2026 and Q4 FY2025 indicate that the company can generate cash from working capital when needed. This volatility may reflect the timing of plasma collection volumes and customer payment terms, and investors should monitor for any structural deterioration.

The company has consistently returned capital to shareholders through buybacks, with notable repurchases in Q4 FY2025 ($150M), Q4 FY2026 ($100M), and Q2 FY2026 ($75M). This suggests management views the stock as undervalued or is offsetting dilution from SBC. The acquisition outflows, particularly the $128.8M in Q1 FY2025, likely relate to the OpSens acquisition, indicating a strategic pivot toward interventional technologies. The lack of dividends and reliance on buybacks and M&A suggests a growth-oriented capital allocation policy, but the elevated leverage (D/E of 1.54) warrants monitoring for debt service capacity.

The cumulative OCF of $591.4M versus net income of $318.4M over the ten-quarter period highlights a significant positive divergence, driven by non-cash charges like D&A and SBC. This suggests that the company's earnings quality is high, as cash flows are not being artificially inflated by accruals. However, the negative net income in Q4 FY2026 and Q1 FY2025 indicates that reported earnings are subject to volatility, possibly from one-time items or impairments. The persistent gap between OCF and net income may indicate that the company is understating its true cash-generating ability, but investors should verify that this is not due to unsustainable working capital benefits.