Health Check: How Prudently Does Ekso Bionics Holdings (NASDAQ:EKSO) Use Debt?

The external fund manager backed by Berkshire Hathaway's Charlie Munger, Li Lu, makes no bones about it when he says 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. As with many other companies Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) makes use of debt. But the real question is whether this debt is making the company risky.

When Is Debt Dangerous?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first step when considering a company's debt levels is to consider its cash and debt together.

View our latest analysis for Ekso Bionics Holdings

What Is Ekso Bionics Holdings's Debt?

You can click the graphic below for the historical numbers, but it shows that Ekso Bionics Holdings had US$1.99m of debt in September 2021, down from US$3.08m, one year before. However, it does have US$43.4m in cash offsetting this, leading to net cash of US$41.4m.

How Strong Is Ekso Bionics Holdings' Balance Sheet?

We can see from the most recent balance sheet that Ekso Bionics Holdings had liabilities of US$4.68m falling due within a year, and liabilities of US$7.00m due beyond that. Offsetting these obligations, it had cash of US$43.4m as well as receivables valued at US$3.12m due within 12 months. So it can boast US$34.9m more liquid assets than total liabilities.

This surplus liquidity suggests that Ekso Bionics Holdings' balance sheet could take a hit just as well as Homer Simpson's head can take a punch. Having regard to this fact, we think its balance sheet is as strong as an ox. Simply put, the fact that Ekso Bionics Holdings has more cash than debt is arguably a good indication that it can manage its debt safely. There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Ekso Bionics Holdings's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.

Over 12 months, Ekso Bionics Holdings made a loss at the EBIT level, and saw its revenue drop to US$9.4m, which is a fall of 8.9%. We would much prefer see growth.

So How Risky Is Ekso Bionics Holdings?

Statistically speaking companies that lose money are riskier than those that make money. And in the last year Ekso Bionics Holdings had an earnings before interest and tax (EBIT) loss, truth be told. Indeed, in that time it burnt through US$9.9m of cash and made a loss of US$11m. With only US$41.4m on the balance sheet, it would appear that its going to need to raise capital again soon. Even though its balance sheet seems sufficiently liquid, debt always makes us a little nervous if a company doesn't produce free cash flow regularly. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. These risks can be hard to spot. Every company has them, and we've spotted 4 warning signs for Ekso Bionics Holdings (of which 1 is concerning!) 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.