TeleCommunication Systems's total free cash flow for the
months ended in Sep. 2015 was
$-0.4 Mil.
Its total free cash flow for the trailing twelve months (TTM) ended in Sep. 2015 was $-10.6 Mil.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
TeleCommunication Systems Free Cash Flow Calculation
Free Cash Flow is considered one of the most important parameters to measure a company's earnings power by value investors because it is not subject to estimates of Depreciation, Depletion and Amortization (DDA). However, when we look at the Free Cash Flow, we should look from a long term perspective, because any year's Free Cash Flow can be drastically affected by the spending on Property, Plant, & Equipment (PPE) of the business in that year. Over the long term, Free Cash Flow should give pretty good picture on the real earnings power of the company.
TeleCommunication Systems's Free Cash Flow for the fiscal year that ended in Dec. 2014 is calculated as
Free Cash Flow for the trailing twelve months (TTM) ended in Sep. 2015 adds up the quarterly data reported by the company within the most recent 12 months, which was $-10.6 Mil.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
TeleCommunication Systems (NAS:TSYS) Free Cash Flow Explanation
Free Cash Flow is very close to Warren Buffett's definition of Owner's Earnings, except that in Warren Buffett's Owner's Earnings, the spending for Property, Plant, and Equipment is only for maintenance (replacement), while in the Free Cash Flow calculation, the cost of new Property, Plant, and Equipment due to business expansion is also deducted. There, Free Cash Flow is more conservative than Owner's Earnings.
In Don Yacktman's calculation of forward rate of return, he uses Free Cash Flow for the calculation. Yacktman explained the forward rate of return concept in detail in his interview with GuruFocus. Yacktman defines forward rate of return as the normalized free cash flow yield plus real growth plus inflation.
This is what Yacktman said in his March 2012 interview - when the S&P 500 was at 1400:
If the business is stable, this calculation is fairly straightforward. For instance, on the S&P 500 we would normalize earnings. We would then calculate what percentage of those earnings are not reinvested in the underlying businesses and are therefore free. Historically, for the S&P 500, this has been just under 50% of earnings. Currently, we expect the S&P to earn about 70 on a normalized basis, a number which is far below reported earnings due to our adjusting for record high profit margins. $70 X ½ / 1400 gives you a normalized free cash flow yield of approximately 2.5%.
The historical real growth rate of the S&P 500 (companies) is about 1.5%. Assuming an inflation rate of 2.5%, the forward rate of return on an investment in the S&P 500 is about 6.5% today (2.5% free cash flow yield plus 1.5% real growth plus 2.5% inflation).
For the growth part of the Forward Rate of Return calculation, GuruFocus uses the 5-year average growth rate of EBITDA per share as the growth rate, and the growth rate is always capped at 20%. For the Free Cash Flow we use per share data averaged over seven years. The reason we use seven years is because research shows that seven years is the length of the typical business cycle.
* For Operating Data section: All numbers are indicated by the unit behind each term and all currency related amount are in USD. * For other sections: All numbers are in millions except for per share data, ratio, and percentage. All currency related amount are indicated in the company's associated stock exchange currency.
Be Aware
Free Cash Flow within a report period can be affected by management's decisions of capital spending. Therefore, it is important to look at long term when it comes to Free Cash Flow.
TeleCommunication Systems Free Cash Flow Related Terms
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TeleCommunication Systems (TeleCommunication Systems) Business Description
TeleCommunication Systems Inc is a Maryland corporation, founded in 1987. The Company develops and delivers wireless communication technology, the development of which has led to ownership of 349 patents and nearly 400 patent applications. It delivers cellular network computing services that include public safety solutions for 9-1-1 call delivery, precision location platforms, and applications that include navigation, locator applications and text messaging, as well as secure wireless communications systems and professional services, including cybersecurity training and technology for defense and other government customers. Customers use its "mobile cloud" software functionality through connections to and from network operations centers, paying the Company monthly fees based on the number of subscribers, cell sites, call center circuits, or other metrics. The Company does business with the U.S. federal government as a prime contractor under major technology contract vehicles, as well as state, local and foreign government entities. The Company's segments include Government, and Commercial. Through the Government Segment, it provides professional services including field support of deployable wireless systems and cybersecurity training to the U.S. Department of Defense and other government and foreign customers. It owns and operates secure satellite teleport facilities, resell access to satellite airtime (known as space segment), and design, furnish, install and operate wireless communication systems and components, including its SwiftLink deployable communication systems which integrate high speed, satellite and internet protocol technology with secure, federal government-approved cryptologic devices. Through the Commercial segment, it enables 9-1-1 call routing via cellular, Voice over Internet Protocol (VoIP) and next generation technology. Other hosted and managed services include cellular carrier infrastructure for text messaging and location-based platforms and applications, including turn-by-turn navigation. Commercial segment customers include wireless carrier network operators, Voice over Internet Protocol service providers, wireless device manufacturers, automotive industry suppliers, and state and local governments. SwiftLink, Xypoint, AtlasBook, Gokivo, Connections that Matter, Designed for Mobility, Secure the Edge, Art of Exploitation, and Enabling Convergent Technologies are registered trademarks or service marks of the Company. The Company sells products and services through direct sales force and through indirect channels. The Company is subject to procurement and other related laws and regulations which carry significant penalties for non-compliance.
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