Is Ekso Bionics Holdings (NASDAQ:EKSO) Weighed On By Its Debt Load?

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 might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Ekso Bionics Holdings, Inc. (NASDAQ:EKSO) does use debt in its business. But should shareholders be worried about its use of debt?

When Is Debt A Problem?

Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. 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. When we think about a company's use of debt, we first look at cash and debt together.

View our latest analysis for Ekso Bionics Holdings

What Is Ekso Bionics Holdings's Net Debt?

The image below, which you can click on for greater detail, shows that Ekso Bionics Holdings had debt of US$1.99m at the end of June 2021, a reduction from US$3.08m over a year. But on the other hand it also has US$45.9m in cash, leading to a US$43.9m net cash position.

A Look At Ekso Bionics Holdings' Liabilities

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$8.20m due beyond that. Offsetting this, it had US$45.9m in cash and US$2.76m in receivables that were due within 12 months. So it actually has US$35.8m more liquid assets than total liabilities.

This excess liquidity is a great indication that Ekso Bionics Holdings' balance sheet is almost as strong as Fort Knox. With this in mind one could posit that its balance sheet means the company is able to handle some adversity. 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. When analysing debt levels, the balance sheet is the obvious place to start. 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're focused on the future you can check out this free report showing analyst profit forecasts.

In the last year Ekso Bionics Holdings had a loss before interest and tax, and actually shrunk its revenue by 14%, to US$9.3m. That's not what we would hope to see.

So How Risky Is Ekso Bionics Holdings?

By their very nature companies that are losing money are more risky than those with a long history of profitability. And the fact is that over the last twelve months Ekso Bionics Holdings lost money at the earnings before interest and tax (EBIT) line. And over the same period it saw negative free cash outflow of US$8.6m and booked a US$6.5m accounting loss. Given it only has net cash of US$43.9m, the company may need to raise more capital if it doesn't reach break-even 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. 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 Ekso Bionics Holdings (of which 1 makes us a bit uncomfortable!) you should know about.

When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.

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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.
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