Declining Free Cash Flow GrowthA falling FCF growth rate reduces internal funding for expansion, product development, or shareholder returns. Even with near-par conversion of net income to FCF, slower FCF growth can force greater reliance on external capital and constrain strategic flexibility if the trend persists.
Increase In Total DebtRising debt, even from a conservative base, raises interest and refinancing exposure. If revenue or cash conversion weakens, higher leverage can limit investment leeway, raise financing costs, and pressure covenants—heightening long-term financial risk absent offsetting returns.
Gross Margin Compression RiskAny sustained gross margin decline in a SaaS business can signal rising hosting, personnel, or customer acquisition costs, which undermine operating leverage. Persistent margin pressure would reduce free cash generation and constrain reinvestment capacity over multiple quarters.