Zoomd Technologies (CVE:ZOMD) Has A Rock Solid Balance Sheet

Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Zoomd Technologies Ltd. (CVE:ZOMD) does use debt in its business. But the more important question is: how much risk is that debt creating?

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Why Does Debt Bring Risk?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.

How Much Debt Does Zoomd Technologies Carry?

You can click the graphic below for the historical numbers, but it shows that as of March 2025 Zoomd Technologies had US$2.01m of debt, an increase on US$1.91m, over one year. But it also has US$12.5m in cash to offset that, meaning it has US$10.5m net cash.

How Strong Is Zoomd Technologies' Balance Sheet?

According to the last reported balance sheet, Zoomd Technologies had liabilities of US$9.35m due within 12 months, and liabilities of US$1.34m due beyond 12 months. On the other hand, it had cash of US$12.5m and US$11.9m worth of receivables due within a year. So it can boast US$13.8m more liquid assets than total liabilities.

It's good to see that Zoomd Technologies has plenty of liquidity on its balance sheet, suggesting conservative management of liabilities. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Simply put, the fact that Zoomd Technologies has more cash than debt is arguably a good indication that it can manage its debt safely.

View our latest analysis for Zoomd Technologies

It was also good to see that despite losing money on the EBIT line last year, Zoomd Technologies turned things around in the last 12 months, delivering and EBIT of US$14m. When analysing debt levels, the balance sheet is the obvious place to start. But it is Zoomd Technologies's earnings that will influence how the balance sheet holds up in the future. So when considering debt, it's definitely worth looking at the earnings trend. Click here for an interactive snapshot.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Zoomd Technologies has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent year, Zoomd Technologies recorded free cash flow worth 77% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.

Summing Up

While it is always sensible to investigate a company's debt, in this case Zoomd Technologies has US$10.5m in net cash and a decent-looking balance sheet. The cherry on top was that in converted 77% of that EBIT to free cash flow, bringing in US$11m. So is Zoomd Technologies's debt a risk? It doesn't seem so to us. The balance sheet is clearly the area to focus on when you are analysing debt. However, not all investment risk resides within the balance sheet - far from it. These risks can be hard to spot. Every company has them, and we've spotted 3 warning signs for Zoomd Technologies (of which 2 shouldn't be ignored!) you should know about.

At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.