Genasys (NASDAQ:GNSS) Is Making Moderate Use Of Debt

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David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' 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. As with many other companies Genasys Inc. (NASDAQ:GNSS) makes use of debt. But the real question is whether this debt is making the company risky.

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When Is Debt A Problem?

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. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. 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 thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Genasys's Net Debt?

As you can see below, at the end of June 2025, Genasys had US$17.1m of debt, up from US$11.7m a year ago. Click the image for more detail. However, because it has a cash reserve of US$5.46m, its net debt is less, at about US$11.6m.

How Strong Is Genasys' Balance Sheet?

The latest balance sheet data shows that Genasys had liabilities of US$49.4m due within a year, and liabilities of US$4.84m falling due after that. Offsetting this, it had US$5.46m in cash and US$8.24m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$40.5m.

While this might seem like a lot, it is not so bad since Genasys has a market capitalization of US$83.5m, and so it could probably strengthen its balance sheet by raising capital if it needed to. But we definitely want to keep our eyes open to indications that its debt is bringing too much risk. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Genasys can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.

View our latest analysis for Genasys

In the last year Genasys wasn't profitable at an EBIT level, but managed to grow its revenue by 8.9%, to US$30m. We usually like to see faster growth from unprofitable companies, but each to their own.

Caveat Emptor

Importantly, Genasys had an earnings before interest and tax (EBIT) loss over the last year. Indeed, it lost a very considerable US$29m at the EBIT level. Considering that alongside the liabilities mentioned above does not give us much confidence that company should be using so much debt. So we think its balance sheet is a little strained, though not beyond repair. However, it doesn't help that it burned through US$11m of cash over the last year. So suffice it to say we consider the stock very risky. 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. For example, we've discovered 3 warning signs for Genasys (1 shouldn't be ignored!) that you should be aware of before investing here.

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.