We're Hopeful That VirnetX Holding (NYSE:VHC) Will Use Its Cash Wisely

Even when a business is losing money, it's possible for shareholders to make money if they buy a good business at the right price. For example, although software-as-a-service business Salesforce.com lost money for years while it grew recurring revenue, if you held shares since 2005, you'd have done very well indeed. But while the successes are well known, investors should not ignore the very many unprofitable companies that simply burn through all their cash and collapse.

So should VirnetX Holding (NYSE:VHC) shareholders be worried about its cash burn? For the purpose of this article, we'll define cash burn as the amount of cash the company is spending each year to fund its growth (also called its negative free cash flow). The first step is to compare its cash burn with its cash reserves, to give us its 'cash runway'.

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When Might VirnetX Holding Run Out Of Money?

A company's cash runway is calculated by dividing its cash hoard by its cash burn. When VirnetX Holding last reported its March 2025 balance sheet in May 2025, it had zero debt and cash worth US$34m. Importantly, its cash burn was US$16m over the trailing twelve months. That means it had a cash runway of about 2.2 years as of March 2025. That's decent, giving the company a couple years to develop its business. The image below shows how its cash balance has been changing over the last few years.

View our latest analysis for VirnetX Holding

How Is VirnetX Holding's Cash Burn Changing Over Time?

In our view, VirnetX Holding doesn't yet produce significant amounts of operating revenue, since it reported just US$3.0k in the last twelve months. Therefore, for the purposes of this analysis we'll focus on how the cash burn is tracking. While it hardly paints a picture of imminent growth, the fact that it has reduced its cash burn by 39% over the last year suggests some degree of prudence. VirnetX Holding makes us a little nervous due to its lack of substantial operating revenue. So we'd generally prefer stocks from this list of stocks that have analysts forecasting growth.

How Easily Can VirnetX Holding Raise Cash?

Even though it has reduced its cash burn recently, shareholders should still consider how easy it would be for VirnetX Holding to raise more cash in the future. Generally speaking, a listed business can raise new cash through issuing shares or taking on debt. Commonly, a business will sell new shares in itself to raise cash and drive growth. By looking at a company's cash burn relative to its market capitalisation, we gain insight on how much shareholders would be diluted if the company needed to raise enough cash to cover another year's cash burn.

VirnetX Holding has a market capitalisation of US$46m and burnt through US$16m last year, which is 34% of the company's market value. That's fairly notable cash burn, so if the company had to sell shares to cover the cost of another year's operations, shareholders would suffer some costly dilution.

So, Should We Worry About VirnetX Holding's Cash Burn?

On this analysis of VirnetX Holding's cash burn, we think its cash runway was reassuring, while its cash burn relative to its market cap has us a bit worried. Cash burning companies are always on the riskier side of things, but after considering all of the factors discussed in this short piece, we're not too worried about its rate of cash burn. Taking a deeper dive, we've spotted 5 warning signs for VirnetX Holding you should be aware of, and 2 of them are a bit concerning.

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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.