Vertex Pharmaceuticals Incorporated (VRTX) Cash Flow Statement

The OCF/NI ratio averaged near 1.0 over the last ten quarters, but quarterly volatility is high, with 2025Q4 at 0.42 and 2026Q1 at 1.38. This suggests that accruals and working capital swings, not core profitability, drive the variability. The 2024Q2 negative net income of -$3.6B, likely due to an IPR&D charge, was matched by a similar negative OCF, implying the charge was non-cash but still affected cash flow timing.

FCF has been robust, with 2026Q1 reaching $1.3B and 2026Q2 at $1.0B, despite a temporary dip in 2025Q4 due to a large working capital outflow of -$947.8M. The FCF margin of 30.4% in 2026Q2 is above the peer average, indicating efficient conversion of revenue into cash. The trajectory suggests that the company's investments in new launches are beginning to generate cash, supporting the prior income statement finding of accelerating revenue.

CapEx has been modest, ranging from 1.5% to 4.9% of revenue, with no significant step-up despite pipeline expansion. This suggests that Vertex's manufacturing and infrastructure needs are not capital-intensive, consistent with its small-molecule focus. The low capital intensity allows for high FCF conversion, but investors should monitor whether gene therapy manufacturing will require higher CapEx in the future.

The large negative working capital change in 2025Q4 likely reflects inventory build-up for Casgevy and VX-548 launches, while the positive change in 2026Q1 suggests collections caught up. These swings are typical for a company scaling new therapies and do not indicate a structural issue. However, the volatility in working capital is a key driver of quarterly OCF variability, and investors should expect continued fluctuations as the product mix evolves.

Buybacks have been consistent, totaling over $3.7B in the last ten quarters, with no dividends paid. This capital deployment strategy suggests management believes the stock is undervalued and that reinvesting in the pipeline offers higher returns. The increase in buybacks in 2026Q2 aligns with the raised guidance and strong revenue momentum, reinforcing confidence in future cash flows.

The cumulative OCF/NI ratio is approximately 1.18, meaning cash generation has consistently exceeded reported net income. This is a positive signal, as it suggests that earnings are backed by actual cash and not aggressive accruals. The only exception is 2024Q2, where a large IPR&D charge caused a temporary divergence, but the overall trend supports the robustness of Vertex's cash flow.